23/05/23

HONG KONG: Securities and Futures Commission set to announce retail crypto trading under new rules.

As published on thestandard.com.hk, Tuesday 23 May, 2023.

Hong Kong is set to announce that retail investors can trade crypto under its new rulebook for the sector, stepping up a push to develop a hub even as digital-asset firms and regulators clash elsewhere in Asia.

The city’s Securities and Futures Commission is due to detail the conclusions of a consultation on retail participation at a Tuesday briefing. The agency is expected to stick with a plan to let individual investors trade bigger tokens like Bitcoin and Ether starting next month under appropriate safeguards.

Hong Kong will roll out a licensing regime for virtual-asset platforms on June 1, part of an effort to restore its status as a cutting-edge financial center. But any embrace of crypto is controversial after a market rout in 2022 that sparked a global spate of bankruptcies like the collapse of the FTX exchange.

Lennix Lai, the chief commercial officer at crypto exchange OKX, said he expects the conclusion of the consultation to reflect “the view from the digital-asset community that safe, secure and compliant retail trading is a key aspect of a robust virtual asset ecosystem.”

In the past few days, tension flared between regulators and the industry in Malaysia and the Philippines. Malaysia reprimanded the Huobi Global platform for operating “illegally” and ordered it to stop activities there. A Huobi spokesperson said the exchange hasn’t operated in the country since 2022.

Meanwhile, the Philippines alleged that a non-US derivatives trading venue recently started by Gemini Trust Co. lacks the necessary permits for the nation. A Gemini spokesperson earlier declined to comment.

Hong Kong in February outlined in its consultation paper a plan to let individual investors trade larger coins on exchanges licensed by the SFC. The regulator intends to ensure safeguards are in place such as knowledge tests, risk profiles and reasonable limits on exposure.

The coins should be included in at least two acceptable, investible indexes from independent providers, one of which should have experience in the traditional financial sector, according to the paper.

Regulators globally are grappling with how to handle the crypto industry. Jurisdictions like Hong Kong and Dubai are trying to attract crypto-related investment. Singapore plans curbs on retail-investor participation. South Korea this week may pass its first standalone crypto legislation after a series of scandals. The US has cracked down on the sector.

Questions remain over Hong Kong’s crypto pivot given the industry has retrenched and only partially recovered from a US$1.5 trillion crash last year. Firms such as Huobi Global, OKX and Amber Group have said they plan to apply for licenses under the new regime

Hong Kong Monetary Authority Chief Executive Eddie Yue has indicated companies should expect an exacting regulatory backdrop.

“We will let them create the ecosystem here and that actually brings a lot of excitement,” Yue said earlier this month in an interview at the Bloomberg Wealth Asia Summit. “But that doesn’t mean light-touch regulation.”