Hong Kong is one of the countries that have embraced cryptocurrencies and blockchain technology. However, the country’s Securities and Futures Commission recently put in place regulations that are meant to manage the risks associated with digital currencies.
Hong Kong Securities and Futures Commission Enhance Cryptocurrency Regulations
As reported by several news outlets, Hong Kong Securities and Futures Commission has moved with speed to introduce new regulations that will make it difficult for scammers to take advantage of unsuspecting clients. Notably, mainland China has less stringent cryptocurrencies rules, but all commercial activities related to this new form of currency are entirely banned.
Due to this regulation, Hong Kong has become a favorite hub for companies offering crypto services as well as initial coin offerings. The increase in cases of money laundering and fraud has triggered the regulator to swing into action to curb the trend.
The new SFC guidelines require all investment fund agencies will now need to get a license from the commission if 10% of the assets they manage on behalf of clients is in the form of digital currencies such as Bitcoin and Ethereum. The agencies will also only be permitted to sell products related to cryptocurrencies to investors who are conversant with the industry. This means that they will not be able to render their services to novice clients.
The commission is also set to introduce a voluntary scheme where exchanges will be allowed to test virtual currency services and products on a temporary basis. The regulatory sandbox will help the transactions to make an informed decision on whether to apply fora license.
The proposed cryptocurrency rules and regulations will be introduced into the industry in phases. What this means is that companies can only issue initial coin offerings for tokens that have to meet all the requirements put in place by the Hong Kong Securities and Exchange Commission. One of the regulations is that the tokens must have existed for at least one year before been made available to potential investors.
This is not the first time that SFC has made drastic decisions to minimize the risks associated with cryptocurrencies. In February 2018, the commission sent several warning letters to cryptocurrency exchanges operating in the region following several complaints from investors. The investors claimed that they were not able to withdraw their digital assets from their accounts. Some of the exchanges were also accused of mismanaging their clients’ digital assets as well as manipulating the market in their favor.
In Match, the commission directed Black Cell Technology to stop their initial coin offering and went an extra mile to charge the company for carrying out promotional activities without the necessary licenses and permits. Hong Kong is not the only economy that is keen on regulating the ballooning cryptocurrency industry. More than 20 developed countries are in the process of introducing similar regulations.
The cost of creating and implementing cryptocurrency regulations will be high but will ensure that investors get value for money. The rules will also improve economies by making it possible for not only investors but also governments to leverage blockchain technology.