Key takeaways:
- The Hong Kong SFC declared that it will be updating its regulations and rules regarding the sale of virtual currencies.
- Under the SFC, virtual assets are now deemed “complex products” governed by the same regulations as other financial products.
The Hong Kong Securities and Futures Commission (SFC) declared that “in light of the latest market developments and inquiries from the industry,” it will be updating its regulations and rules regarding the sales of virtual currencies.
The SFC announced in a notice dated October 20 that some virtual currency products will only be accessible to accredited investors in accordance with the revised standards. Furthermore, before managing any transactions, intermediaries in the cryptocurrency field should assess whether “users have knowledge of investing in virtual assets.”
According to the SFC, virtual assets are growing in popularity in some regions of the world, but the regulatory environment is still inconsistent worldwide. The SFC added:
“The risks associated with investing in virtual assets identified by the SFC back in 2018 continue to apply.”
Under the SFC, virtual assets are now deemed “complex products” and are governed by the same regulations as other financial products, according to the revised standards.
Examples of sophisticated products mentioned by the commission include cryptocurrency exchange-traded funds and goods issued outside of Hong Kong.
After the crisis involving the JPEX cryptocurrency exchange, many Hong Kong cryptocurrency consumers are still in shock. Millions of dollars worth of losses were reported by users in over 1,000 complaints about JPEX, the SFC said in September.
The operation of an unlicensed cryptocurrency exchange led to the subsequent arrest of six JPEX employees by local police.
Although it’s unclear if the JPEX events directly led to SFC updating its policy, the regulator announced in September that it will step up efforts to warn cryptocurrency investors of risks. A working group was established in October by the SFC and the Hong Kong Police Force with the objective of keeping an eye on and looking into any possible illicit activity utilizing digital assets.
