Hong Kong Finalizes Ruling to License Crypto Exchanges, Starting June 1

Crypto exchange

Hong Kong’s Securities and Futures Commission (SFC) announced on Tuesday that it had concluded its consultation on allowing licensed crypto exchanges to offer services to retail investors. In a post on its official website, the regulator noted it would roll out guidelines for virtual asset trading platform operators starting June 1.

The SFC also noted that it would start accepting applications for crypto exchange licensing on the aforementioned date but insists these trading platforms must oblige to the guidelines it has set out for their operations.

According to the SFC, it received 152 written submissions from professional associations, consulting firms, and market participants before taking its decision. The regulator also noted that a majority of the firms that tendered their views approved of the concept of allowing retail investors to trade cryptocurrencies on licensed exchanges.

Hong Kong Proposes Robust Requirements for Exchanges

Following the approval, the SFC proposed robust measures to protect retail traders while trading with licensed exchanges in Hong Kong. Amongst others, the SFC insisted on safe custody of assets, segregation of client assets, avoidance of conflicts of interest, and cybersecurity standards as basic requirements it expects licensed trading platforms to adhere to.

The new requirements also stipulated that an approved crypto exchange’s capital reserves would not go below 5,000,000 HK$ ($639,000). Licensed crypto exchanges are also expected to submit monthly asset declaration reports stating available capital, debit and credit statements, and profit and loss analysis to the SFC.

One-Year Performance Check Before Listing

The fast-rising global crypto hub also stipulated that tokens would go through a one-year performance analysis before listing on any exchange so as to protect investors from scam projects. According to the new law, the SFC will conduct further checks on tokens before listing them, even if they once passed verifications on another platform.

The Hong Kong regulator disapproved of third-party asset custody, stating it would not allow it to regulate and enforce compliance properly. The SFC also urged crypto exchanges that would not comply with the new rules to wind down operations in the country.

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