Hong Kong’s financial regulators have tightened regulations on the cryptocurrency sector by issuing new guidance classifying certain crypto products as “complex” and restricted to professional investors only.
The joint circular from the Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) aims to clarify rules around virtual asset activities. However, the definition of “complex” remains vague.
For example, the regulators state overseas crypto ETFs would likely be deemed complex and limited to professionals. But some crypto derivatives on approved exchanges may still be allowed for retail investors.
The guidance also imposes checks like liquidity requirements for crypto advisors and stricter promotion rules. Crypto firms may have to conduct “knowledge tests” when serving retail clients.
While sending mixed signals, Hong Kong has increased oversight of the crypto industry through various policy moves this year. However, the inconsistent approach has created uncertainty around the jurisdiction’s broader crypto ambitions.
The latest complex product limitations suggest Hong Kong is still cautious about retail crypto proliferation even as institutional adoption advances. The impacts on market development remain to be seen.
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