Hong Kong’s Protections and Futures Commission (SFC) says it will bring crypto funds below its securities regulations to improve investor protection.
In a circular issued Thursday, the monetary regulator said that investment funds based in Hong Kong and that plan to invest more than 10 percent of their gross portfolios into “accepted assets,” either directly or indirectly via intermediaries, will have to be certified and registered with the agency.
In a footnote, the SFC further explained that “practical assets” are defined as “digital tokens (such as digital currencies, utility remembrances or security or asset-backed tokens) and any other virtual commodities, crypto assets and other assets of essentially the verbatim at the same time nature.”
This rule applies irrespective of whether the underlying crypto assets amount to sanctuaries or futures contracts as defined in the Securities and Futures Ordinance (SFO), according to the disclosure.
Ashley Alder, the SFC’s chief executive officer, said in a news set free:
“The measures announced today allow us to regulate the management or distribution of practical asset funds in one way or another so that investors’ interests would be kept either at the fund management level, at the distribution level, or both”
Jehan Chu, governing director of the Hong Kong-based crypto investment firm Kenetic Central, said the move comes after the SFC had reached out to the industry, seeking feedback and acuities.
“We are happy to see the SFC taking concrete steps to provide clarity and guidance encompassing digital asset management, distribution of fund interests and trading party lines, which shows that the SFC is willing to support the growth of the crypto and blockchain eco-system in a suitable and sustainable manner,” he said.
The regulator also indicated it is planning to stand for cryptocurrency exchanges in the city to opt-in to a new sandbox program in a bid to determine whether to take advantage of a licensing scheme for trading platforms in the future – an approach taken by SFC’s counterpart in Japan.
Impaired the sandbox, the SFC said it will observe the operations of cryptocurrency exchanges and order interested and qualified parties in the regulatory sandbox after careful reward.
“Factors to be considered include the adequacy and effectiveness of the proposed conceptual framework; capacity to comply with the terms and conditions; investors’ interests; as well as municipal market and international regulatory developments,” the statement reads.
Currently, not any of the crypto exchanges in Hong Kong are licensed, as per the conceptual framework letterhead published today. If granted, they will be subject to intensive reporting and overseeing to ensure that strict internal controls are operating as expected and investor worths are protected.
Alder added, “We hope to encourage the responsible use of new technologies and also take care of investors with more choices and better outcomes.”
Hong Kong peter out image via Shutterstock
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