Hong Kong securities supervision involves treating cryptocurrency trading platforms as traditional brokers if they offer security tokens, in accordance with its second set of regulatory guidelines for the sector.

The Securities and Futures Commission (SFC) released its presentation on virtual asset swaps on Wednesday, announcing a new licensing regime that, in its view, differs from that applied to investment dealers and automated trading platforms. Hong Kong.

Under the new licensing conditions, cryptographic exchanges may only offer products to "professional investors" as defined by the SFC. Companies can only make changes to products or services after approval by the regulator, and must maintain existing relationships with an independent audit firm and prepare annual reports on exchange activities. The exchanges must also submit monthly reports to the commission.

Any virtual asset company trading at least one security token falls within the regulatory authority's jurisdiction. Applications for peer-to-peer (P2P) exchanges – such as decentralized exchanges (DEX) or non-dependent business platforms – will not be reviewed by the SFC.

Hot wallets – encrypted storage with live Internet connections – can not contain more than 2% of the total funds in an exchange. While stock exchanges are mandated to have insurance for all assets in case of infringement or hacking, the SFC states.

Anti Money Laundering (AML) and Client Awareness (KYC) procedures are cited as a major concern. The SFC believes that exchanges must take steps to "establish the true and complete identity of each of its customers and customers." financial position, experience and investment objectives ".

Upon licensing, companies enter the regulatory SFC sandbox which, according to the regulator, brings stricter reporting and monitoring standards.

The regulator also warned Wednesday the suppliers of derivatives based on cryptocurrency and intended for citizens of Hong Kong without administrative formalities. The SFC stated that it "had not authorized or authorized a person in Hong Kong to offer or exchange futures on virtual assets" and that "it was unlikely to". to authorize a license or authorization to carry on an activity on such contracts ".

Cryptographic vendors such as BitMEX and OKEx are already restricting access to their products in Hong Kong.

Adopted in November 2018 and updated in October, the first cryptographic licensing system of the SFC, for funds that invest 10% or more of their cryptography portfolios, has given approval to a fund only the year last.

Image of Hong Kong via Shutterstock

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