Hong Kong’s SFC plans to regulate all crypto trading platforms.


This step will be taken after the regulatory authority has introduced a regulatory framework in 2019.
The new regime will require all crypto trading platforms to apply for an SFC license.
Initially, SFC will only allow crypto trading platforms that offer services to professional investors.

The Hong Kong government plans to change the rules for crypto trading companies that operate or provide services within the city. Clara Chiu, Director of Licensing at the Securities and Futures Commission (SFC), announced these details in a keynote address during Hong Kong’s FinTech Week 2020. Chiu reportedly revealed details of a consultation paper proposing to expand the scope of SFC’s regulation so that the agency would oversee all centralized virtual asset trading platforms in Hong Kong.

According to one report, the company is seeking total control, whether the trading platforms provide access to tokens categorized as securities or trade exclusively in crypto-currencies such as BTC and ETH. This step comes after the regulatory authority introduced a regulatory framework last year that aimed to treat crypto trading platforms that trade at least one token according to the same rules as securities brokers. However, registration with the regulator was voluntary.

Ashley Alder, CEO of SFC, commented on the proposed changes,

“This is a significant limitation, because if a platform operator is truly determined to operate completely off the regulatory radar, he can do so simply by ensuring that his traded crypto assets do not fall under the legal definition of a security. As a result, the Hong Kong government will today propose a new licensing scheme as part of its anti-money laundering legislation that will require all crypto-currency trading platforms operating there or targeting investors in the city to apply for an SFC license”.

Alignment with FATF standards

According to Chiu, these changes are in line with the guidelines of the Financial Action Task Force (FATF). According to these guidelines, all crypto trading platforms must apply for an SFC license under Hong Kong’s anti-money laundering legislation. The regulator also pointed out that Hong Kong is a member of the FATF and that the city is required to align with the AML standards for virtual asset providers.

Chiu continued that the platforms should endeavor not to commit serious violations such as market manipulation, as this would result in the authority intervening and restricting their activities. Under the proposed regime, the FCS will initially only allow crypto trading platforms that serve professional investors. In addition, they must maintain a high level of investor protection and security. However, the new proposed framework will not change the platforms currently operating under the security token system.


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