Hong Kong SFC finalizes regulatory framework for virtual asset trading platforms

The Hong Kong Securities and Futures Commission (SFC) concluded a consultation period today, developer Finalized regulatory requirements for SFC-licensed virtual asset trading platform operators.

During the consultation period, the SFC collected 152 written submissions from interested parties, including industry and professional associations, professional and consulting firms, market participants, licensed corporations, and individuals. These respondents largely welcomed the proposed measures, although several requested clarification. After an evaluation of the comments, the SFC made modifications and clarifications to some of the proposed requirements.

In a notable decision, the SFC approved the proposal to allow licensed platform operators to serve retail investors, with the majority of respondents agreeing. To safeguard these investors, the SFC will introduce robust measures such as suitability assessments during onboarding, rigorous token due diligence, admission criteria, enhanced governance, and mandatory disclosures.

“Hong Kong’s comprehensive virtual asset regulatory framework adheres to the principle of ‘same business, same risks, same rules’, with a key focus on robust investor protection and risk management,” said Ms. Julia Leung, executive director of SFC. “This will foster the sustainable development of the industry and support innovation.”

The recently published Guidelines for Virtual Asset Trading Platform Operators will be effective as of June 1, 2023 and set out key expectations such as safe custody of assets, segregation of client assets, prevention of conflicts of interest and the compliance with cybersecurity standards and requirements.

The SFC will provide further guidance on the new regulatory requirements, license application procedures, and transition arrangements. Application forms for trading platforms will be available on May 25, 2023 and the SFC will start accepting applications on June 1, 2023.

In response to the regulations, operators are encouraged to apply for a license if they can meet SFC standards. Those unable or unwilling to comply should arrange for an orderly shutdown of their Hong Kong operations.

To protect investors, the SFC will continue to work with the Council of Investors and Financial Education to educate the public about the risks of operating on unregulated platforms. At the time of this announcement, the SFC has not approved any virtual asset trading platform to serve retail investors. Most of the platforms currently accessible to the public are not regulated by the SFC.

Market response to the new regulations has been mixed, with Hong Kong concept token CFX(Conflux) experiencing a setback.

Currently, the Hong Kong SFC has with licence just two virtual asset trading platforms: OSL Exchange and HashKey Pro. With the new regulatory framework set to take effect in June, this marks a major milestone in Hong Kong’s efforts to regulate the fast-growing virtual asset sector.


Scroll to Top