Key Takeaways
- HKSFPA argues that the Hong Kong financial market is heavily focused on supervision
- Through a dedicated SRO system, the HKSFPA hopes to create a regulatory environment that is both structured and adaptable.
The Hong Kong Securities and Futures Professionals Association (HKSFPA) is calling for independent self-regulatory organizations (SROs) to oversee the crypto industry, arguing that the current system is tilted too heavily towards supervision and stifles innovation.
“The Hong Kong financial market industry is too focused on supervision,” the HKSFPA said in a recent recommendation letter, “but there is no organization to maintain the overall development of the industry.”
The HKSFPA’s proposal seeks a middle ground. They recommend that the Securities & Futures Commission (SFC), Hong Kong’s main financial regulator, retain control over market conduct but cede licensing authority to industry-specific bodies. This would create separate licensing bodies for securities, futures, asset management, and virtual assets.
By proposing a dedicated SRO system, the HKSFPA hopes to create a regulatory environment that is both structured and adaptable. This would allow the framework to address the present needs of the virtual asset market while also anticipating future developments in the constantly evolving digital asset landscape.
The HKSFPA believes this approach will allow Hong Kong to remain competitive in the global financial space and further solidify its position as a leading international financial center. Their vision involves “statutory self-regulating” and autonomous bodies overseen by the SFC, but with the power to grant licenses delegated to industry players themselves.
This proposal comes against a backdrop of mixed signals from Hong Kong regulators towards crypto industry. In April 2024, Hong Kong police froze over $29 million in assets connected to JPEX, a collapsed cryptocurrency exchange. Additionally, the SFC has issued a warning on unlicensed crypto exchanges, including MEXC in March 2024.
However, Hong Kong has had a much more tolerant approach to digital assets in comparison to other financial regulators around the world. On April 15th, the SFC approved spot Bitcoin and Ether exchange-traded funds from issuers such as Harvest Fund Management, Bosera Asset Management, and China Asset Management.
Last year, the SFC provided virtual asset licenses to crypto exchanges Hashkey and OSL. Further, in November 2023 SFC also granted a license to Swiss crypto bank SEBA to offer crypto-related services.
