This post is also available in: Español
Hong Kong’s Securities and Futures Commission (SFC) is exploring ways to regulate the various cryptocurrency trading platforms already operating in the city and thus tighten investor protection, according to its outgoing chairman Carlson Tong Ka-shing.
Hong Kong-based Cryptocurrency Exchanges Could See New Rules Introduced Soon
The Securities and Futures Commission (SFC), Hong Kong’s top financial regulator, is reportedly looking into ways to introduce new regulation to cryptocurrency platforms that are currently operating in the city.
The SFC’s outgoing chairman, Carlson Tong Ka-shing, who is due to hand over the SFC’s reins to Tim Lui Tim-leung on October 19, told the South China Morning Post that the city plans on tightening investor protection.
However, the SFC is technically restricted, as its jurisdiction applies only to securities. Tong says that it’s currently the commission’s “chief sensitivity.”
Tong explained to the South China Morning Post:
“We do not think imposing a total ban on these platforms is necessarily the right approach, and it will not work in today’s internet world when trading can cross national boundaries.”
He explained that even if the SFC was to introduce a complete ban on crypto exchanges, transactions could still efficiently be conducted via platforms operating in overseas markets, which would make the efforts futile.
“We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities,” he said. The main problem the commission is facing, Tong told the South China Morning Post, is that crypto exchanges do not fit in the custodian, audit, or valuation requirements that are generally expected under the Securities and Futures Ordinances.
Introducing New Regulations Harder Than It Seems, but Welcomed by Crypto Exchanges
However, Tong noted that no other international market currently has a comprehensive regulatory framework tailored to cryptocurrency platforms in place. The commission now has a tough time ahead, as it needs to introduce a regulating a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected.
Several centralized crypto exchanges are currently operating out of Hong Kong, but unlike traditional stock exchanges, they remain largely unregulated, SCMP reported. The SFC has issued several warnings in recent months for investors to be wary of trading on such exchanges. Operators have also received notes, with the SFC saying that they must abide by its regulations.
For their part, cryptocurrency exchange operators have welcomed the SFC’s move, saying that a stricter regulatory framework benefits everybody. Angelina Kwan, COO at BitMEX, said she would work closely with the SFC on the proposed regulations. Jeremy Allaire, founder, and chief executive for US-based cryptocurrency unicorn Circle, told the South China Morning Post that the company recognizes there are real risks for investors, and welcomes rules that would deal with those risks.