The city of Hong Kong is poised to revoke its prohibition on retail trading of cryptocurrencies, as it endeavors to regain its status as a notable fintech center. The Securities and Futures Commission (SFC) has concluded its consultation on regulations governing digital asset platforms and has declared that authorized entities will be authorized to provide services to retail investors. The SFC will institute safeguards for retail investors, including a rigorous screening procedure for tokens before they are listed on exchanges. This determination marks a reversal of the limitations imposed the previous year, and the revised regulations are anticipated to become effective on June 1, 2023.
During the consultation period, the SFC sought input from various industry stakeholders, who generally expressed support for the proposed requirements. Based on the favorable feedback, the regulator has opted to permit licensed virtual asset providers to cater to retail investors in cryptocurrencies, representing a significant change in policy. However, smaller investors will be required to meet specific obligations, such as completing investor training and demonstrating an understanding of potential risks. The SFC has stressed the importance of sound governance, robust onboarding processes, and transparent disclosure practices as part of the protective measures. While the SFC will not release a roster of authorized assets for retail investors, platform operators are reminded of their legal responsibilities to ensure compliance with Hong Kong’s public offering regulations.
The resolution to revoke the ban on retail trading is a reaction to the exodus of cryptocurrency startups to rival jurisdictions, particularly Singapore, which has more advantageous regulatory landscapes.
