Different government authorities in the world’s most populated continent have held different opinions about cryptocurrencies and how they are supposed to be regulated.
In India, the government has banned local banks from dealing with crypto exchanges and painted a dark picture of the invention and how it could be used for money laundering and other criminal activities.
It is not under such conditions that one would expect the government to come up with plans to regulate the new industry, even though it has spoken favorably about Distributed Ledger technology (DLT).
Moving down to neighboring China and South Korea, there have been no clearcut rules about how citizens are to trade cryptocurrencies. The larger efforts have been towards regulating crypto exchanges that serve the new digital asset class.
The good news is that in Hong Kong, an autonomous territory in South Eastern China, things are being done differently, at least for the time being.
Hong Kong Crypto Regulation
The Hong Kong Securities and Futures Commission (SFC) on Nov 1 announced the release of a new regulatory framework for crypto asset managers, fund distributors, and crypto exchanges. A broader framework is also in progress for the exchanges according to the publication made available by the watchdog.
From now on, crypto fund managers who invest more than 10% of their portfolio into crypto assets will be required to get a license from the SFC according to the new regulatory rule. Also, a new sandbox will be used by the watchdog to assess cryptocurrency exchanges that deal with only professional investors.
If these exchanges were to meet up with Anti Money Laundering (AML), Know Your Customer (KYC), and other regulatory requirements, then they would qualify to apply for an operating license.
No Financial Incentives For Clients To Trade Crypto
What may be considered a twist in the conceptual framework for exchanges that the SFC is rolling out is that firms will not be allowed to offer trade futures, derivative contracts or other forms of financial incentives to clients.
Members of the crypto community believe that derivatives would offer more risk management to crypto investors and encourage institutional involvement.
The new rule will mean that top exchanges such as Binance, OKEx, and BitMEX will not play any part in this stage of crypto industry growth unless they expand to more crypto-friendly regions like Malta.
At this time in cryptocurrency history, any form of a regulatory framework that favors the growth of the invention will be applauded.
The Hong Kong securities watchdog has done this by creating an atmosphere that encourages investment into cryptocurrencies. Crypto exchanges will likely earn more trust with a regulatory license, and over time, there is no doubt that at later stages, these rules will become more favorable for everyone.