Hong Kong’s securities regulator has launched a round of consultation for crypto requirement proposals which include enabling retail access to major tokens. 

As part of its ambitions to become a crypto hub, Hong Kong is widening crypto access beyond professional investors – individuals with at least HK$8 million ($1 million) in investable assets – to include retail investors. But authorities do not want to fully open retail access to all tokens, citing concerns about risk. 

In line with its public position, the Securities and Futures Commission (SFC) has launched a consultation on proposed requirements for licensed virtual asset (VA) trading platforms, including limiting retail access only to major cryptocurrencies. 

Eligible Tokens

According to the SFC, licensed platforms have the ultimate responsibility to perform due diligence and satisfy the «token admission criteria» before admitting cryptocurrencies for trading. 

This includes a «general token admission criteria», which covers a range of factors including the token's management team, crypto maturity and liquidity, the security infrastructure of the blockchain protocol and more. 

For retail investors, platforms can only offer «eligible large-cap virtual assets», defined as tokens that are included in at least two «acceptable indices» by at least two independent index providers. 

Local Versus Overseas Access

According to the SFC, it notes concerns by some that allowing retail access could legitimize the trading of many virtual assets that have no intrinsic value and high risk. But banning retail access, may «result in investor harm as it may push retail investors to trade on unregulated VA trading platforms overseas, which could easily be accessed online».

«[I]f any of these unregulated VA trading platforms collapses, retail investors would have difficulty seeking any recourse. This has been the case in the recent collapse of many unregulated VA trading platforms, as investors could not withdraw their assets and suffered substantial losses,» the SFC said.

The consultation period for the new crypto proposals will end on March 31.