Hong Kong regulator to issue crypto licenses with safeguards for retail investors

Hong Kong’s securities regulator said its crypto licensing regime will include measures to protect retail investors as it introduces tougher rules for digital asset firms from June 1. with the collapse of crypto exchange FTX last year a major blow.

The new regime requires all trading platforms and exchanges to apply for a license, failing which fines and jail time would follow. Operators should also check with customers to ensure that retail traders from China, where crypto trading is banned, will not be accepted, Keith Choi, acting head of intermediaries at the Securities and Futures Commission ( SFC) said at a press conference on Tuesday. “Operators have a responsibility to comply with laws and regulations in the jurisdictions in which they provide services,” he said.

The SFC has concluded a February consultation on digital asset trading, which offers various measures to protect investors. A total of 152 submissions were received. The measures include requiring companies to set an exposure limit for retail investors and only allowing retail trading of highly liquid tokens that have been issued for at least a year. The new system also covers the marketing of services from unlicensed platforms.

“It is an offense to post an advertisement related to an unlicensed platform, this would cover (social media influencers) personally promoting the services of (these platforms) to Hong Kong investors,” said Elizabeth Wong, head of the SFC’s fintech unit.

The International Organization of Securities Commissions (IOSCO) unveiled the world’s first approach to crypto-asset regulation on Monday, as the collapse of the FTX exchange last year fueled fears that consumers could be not protected. Still, some investors are undeterred, as bitcoin has since recovered 75% to $27,431 on Tuesday. It has hovered above $26,000 since the banking turmoil in the US and Europe in March.

The SFC will begin accepting applications from June 1.

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