Some Deep Implication of Hong Kong SFC’s New Crypto Regulatory Rules

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The Hong Kong Securities and Futures Commission (SFC) has launched new regulatory framework for crypto funds and exchanges yesterday. The new rules typically target the virtual asset portfolio managers and fund distributors and enforce them under the supervision of the SFC. Meanwhile, it also elaborates a conceptual framework for the possible regulation of cryptocurrency trading platforms.

There are two key stipulations that worth noting: one is that funds that invest more than 10 per cent of their assets in virtual assets will need to be licensed by the SFC; and the other is, to the crypto exchange operators, the SFC will propose them a regulatory regime known as a “sandbox”.

Some professional lawyers and academicians demonstrated their point of view on the SFC’s new rules and discuss the main effects on the crypto market.

Chen Yunfeng, the senior partner of Zhonglunwende Law Firm commented that:

First of all, under the sandbox regulatory regime, the SFC would still allow the crypto exchanges to trade while negotiating with them on the expected regulatory standards instead of a total ban. The SFC is exploring more reasonable regulatory measures for the crypto market by strengthening supervision in anti-money laundering, fraud, financial auditing.

Secondly, Hong Kong government holds advanced regulatory attitude towards virtual currency that will attract more investment entities from other countries to obtain legal business qualifications by setting up exchanges in Hong Kong.

Finally, classifying the eligibility of investors is more conducive to protecting the interests of investors and maintaining the stability of the virtual currency market. The sandbox is not only a regulatory exploration of the crypto exchanges, but also an important protective initiative for general investors and the virtual currency market.

Moreover, Deng Jianpeng, a professor of the Central University of Finance and Economics also indicated that,

“On one hand, Hong Kong draw on the ‘regulatory sandbox’ of Singapore, Canada and the United Kingdom and applies it to the blockchain virtual currency trading. As thus the SFC launches the sandbox supervision to test the potential risks. Obviously, Hong Kong is learning and adopting some of the valuable regulatory guidance from other well-developed countries.

On the other hand, Hong Kong is cautious about blockchain and virtual currency trading, but it still attempts to bring them under regulation. The effectiveness of Hong Kong’s new regulator rules will have reference value on building a long-term regulatory mechanisms in Mainland China.”