SFC sets out new regulatory approach for virtual assets

SFC sets out new regulatory approach for virtual assets

SFC sets out new regulatory approach for virtual assets 1400 935 Hauzen

The Securities and Futures Commission (SFC) issued a statement setting out a new approach which aims to bring virtual asset portfolio managers and distributors of virtual asset funds under its regulatory net. It also sets out a conceptual framework for the potential regulation of virtual asset trading platforms.

In light of the significant risks virtual assets pose to investors, the SFC will adopt new measures within its regulatory remit to protect those who invest in virtual asset portfolios or funds. The SFC will impose licensing conditions on firms which manage or intend to manage portfolios investing in virtual assets, irrespective of whether the virtual assets meet the definition of “securities” or “futures contracts”.

In an accompanying circular, the SFC provided detailed guidance and reminded firms which distribute funds investing in virtual assets that they should be registered with or regulated by the SFC and comply with its regulatory requirements, including the suitability obligations, when distributing these funds.

The SFC also set out a conceptual framework for exploring the potential for regulating virtual asset trading platforms (a.k.a. cryptocurrency exchanges) in the SFC Regulatory Sandbox. Platform operators willing to be supervised can opt-in to allow the SFC to observe their operations in the sandbox environment, with proposed regulatory requirements comparable to those applicable to licensed providers of automated trading platforms, which the SFC already supervises. One of the requirements is that platform operators should provide services only to professional investors.

The SFC is closely monitoring the development of virtual assets and may issue further guidance where appropriate.

For details of the SFC’s new regulatory approach for virtual assets, please click here.

Please contact us today if you would like to know more about the regulation of digital assets in Hong Kong.

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