Hong Kong Securities Regulator To Propose New Rules For Crypto Trading

News, Regulation | October 17, 2018 By:

Carlson Tong Ka-Shing, chairman of the Hong Kong Securities and Futures Commission (SFC), said that the agency is planning to introduce crypto regulation to protect investors.

In an interview with South China Morning Post (SMCP), Tong, who will pass his position in the SFC to Tim Lui Tim-leung on Oct. 19, said that the commission is not leaning towards a total ban of cryptocurrencies in the city.

“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,” said Tong. “Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets.”

Tong added that that the SFC is technically restricted by its legal regulatory reach of securities only, which is why they need to see if and how crypto platforms can be regulated to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected.

“We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities,” he said. “They do not fit in the custodian, audit or valuation requirements, for instance, normally expected under the Securities and Futures Ordinance. No other international market currently has a comprehensive regulation (sic) framework for these cryptocurrency platforms.”

SMCP reported that cryptocurrency exchanges operating in Hong Kong have welcomed the move. BitMEX chief operating officer Angelina Kwan told the publication that she would work closely with the SFC on the proposed regulations.

“We hope the guidelines or regulations being considered will keep pace with market developments,” Kwan said. “The US has introduced regulations over cryptocurrency and there are futures products being traded by the CME Group and the CBOT. This shows that a regulatory authority can help to develop a new industry.”

Jeremy Allaire, CEO and founder of Circle, which has operations in Hong Kong, said that they’ll pay very close attention when new licensing or regulatory frameworks emerge, and will proactively work with the government on those frameworks.

“We also recognize there are real risks for investors and rules need set in place to deal with those risks,” Allaire said. “So we try to be constructive in working with regulators in all the markets we are in. Since we started the company, we have given a commitment to collaborating with governments. We want to ensure the long-term potential of the digital asset industry.”