The Securities and Futures Commission launched new rules for licensed virtual asset trading platforms as investors continue to seek exposure to alternatives.
The new rules will apply to all platforms operating in Hong Kong that offer to trade at least one security token. In addition to regulatory standards «comparable to those which apply to licensed securities brokers or automated trading venues» the SFC also imposed additional requirements associated with specific virtual asset risks.
For example, licensed platforms are required to offer their services to professional investors with sufficient virtual asset knowledge. Licensed platforms will also be placed in the «SFC Regulatory Sandbox» for a period of close monitoring.
«Regulators need to be open to the benefits of innovation, but they should also be ready to tackle the risks to investors which some financial technologies give rise to,» said Ashley Alder, the SFC’s chief executive officer. «We have decided to move ahead with this new regulatory framework because it is clearly in the public interest to enable investors to choose to participate in properly regulated virtual asset trading platforms.»
Virtual Asset RIsks
The SFC noted that virtual assets will not be subject to the same kind of traditional regulations as, say, stocks or bonds, adding that it had no power to supervise platforms that only trade virtual assets or tokens which do not qualify as securities under Hong Kong law. On the same day, it also issued a statement warning investors about the risks of virtual asset futures contracts due to their unregulated and highly leveraged nature.
«The jury is still out on whether some virtual assets – especially those that have no intrinsic value – have a useful social function or can be considered as equivalent to conventional financial assets,» Alder said during the recent Hong Kong FinTech Week 2019, where he first unveiled that new virtual asset trading platform regulations would be introduced.
