Spot Trading Regulations Evolve in Hong Kong
Spot trading takes center stage as Hong Kong’s Securities and Futures Commission (SFC) progresses towards enabling retail investors to purchase cryptocurrency-related Exchange Traded Funds (ETFs) in the spot market
“We welcome proposals utilizing innovative technology that enhances efficiency and customer experience,” remarked SFC Chief Executive Officer Julia Leung, as reported by Bloomberg. “We’re open to trying it out, provided new risks are addressed. Our approach remains consistent regardless of the asset.”
Hong Kong’s regulatory stance on cryptocurrencies has been adaptable, with their viewpoint on retail participation in digital assets evolving throughout the year.
Initially, in January, the SFC imposed stricter regulations, limiting retail investors’ access to crypto spot ETFs and permitting them only for professional investors with portfolios exceeding 8 million HKD ($1 million). However, by October, the SFC revised its regulatory framework to enable a broader range of investors to engage in spot crypto and ETF investments, subject to conditions like passing a knowledge test and meeting net worth requirements lower than those for professional investors.
While both the United States and Hong Kong permit cryptocurrency exchange-traded funds (ETFs) based on futures contracts, their adoption has been relatively limited compared to the broader fund industry. In Hong Kong, ETF listings such as Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures presently hold a combined asset value of approximately $65 million.
Under the SFC’s digital asset regulatory framework, individual investors can trade major cryptocurrencies like Bitcoin and Ether on licensed cryptocurrency exchanges. Currently, BC Technology Group Ltd.’s OSL and HashKey Exchange are the sole platforms in Hong Kong authorized for cryptocurrency trading. Additionally, mandatory regulations concerning stablecoins, digital tokens designed to maintain a stable value, are anticipated to be introduced between 2023 and 2024.
“As the crypto ecosystem progresses gradually to a point of comfort, we are willing to expand access to a broader investing public,” Leung mentioned in a recent interview. Notably, Hong Kong has also recently revealed its Web3 plans.
In June, Hong Kong introduced a specialized regulatory framework for virtual assets as part of its strategy to re-establish itself as a prominent financial center. These regulations aim to attract businesses while emphasizing investor protection, particularly following a recent alleged fraud of HK$1.6 billion ($204 million) at the unlicensed JPEX cryptocurrency exchange in the city.
In response to this situation, Leung stressed the critical necessity of a robust and comprehensive regulatory structure. The Securities and Futures Commission (SFC) has taken steps to enhance transparency in the licensing process for operating virtual asset exchanges.
The Hong Kong Monetary Authority, the city’s central bank, is exploring the possibility of providing guidance to banks on offering digital asset custodial services. The availability of such services is seen as a key element in fostering the growth of the digital asset ecosystem.
