Kostyantyn Kryvopust: Hong Kong regulators are going to release guidelines for crypto exchange licensing in May

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Hong Kong’s Securities and Futures Commission (SFC) will publish guidelines on the licensing regime for cryptocurrency exchanges by next month.

SFC Director General Julia Leung announced the plan during the event, noting that the city will unveil its new cryptocurrency system in May, according to the report Bloomberg on Thursday.

Back in February, the SFC published a consultation paper on a proposed regulatory regime for crypto trading platforms. According to a Bloomberg report, the consultation document has received more than 150 comments.

Additionally, under a new licensing regime for crypto platforms due to come into effect from June, the SFC will allow retail investors to trade in certain digital currencies, the agency said earlier this year.

The regulator detailed that retail investors will be allowed to trade certain “large-cap tokens” on licensed exchanges, subject to safeguards such as background checks, risk profiles and reasonable risk limits.

The agency did not specify which large-cap tokens would be allowed. However, the FT report claims that Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization, will be opened up to retail customers.

The SFC first introduced its cryptocurrency regulatory framework back in 2018, which banned retail investors from trading in cryptocurrency.

However, the SFC recently said that “the virtual asset landscape has changed significantly” since it first announced the regulatory regime.

Licensed trading platforms are starting to offer cryptocurrency services in Hong Kong

It is worth noting that some licensed trading platforms have already started offering cryptocurrency-related services to investors in Hong Kong under the supervision of the SFC.

OSL and Hashkey Group are two such platforms that became the first crypto exchanges in the city to receive licenses from the SFC.

The duo also uses cryptocurrency to fiat conversion services from ZA Bank, Hong Kong’s largest online bank. The bank allows users of trading platforms to withdraw crypto deposits in US dollars, Hong Kong dollars and Chinese yuan.

“For the dozen or so firms involved, big and small, foreign and local, the main challenge is to find a way to make it work,” ZA Bank CEO Ronald Yew said earlier this month.

The CEO added that ZA Bank will also provide the same services to more crypto platforms in the city once they receive their licenses.

Hong Kong’s new crypto regime comes as the city aggressively promotes Web3 and blockchain to position itself as a hub for digital innovation in Asia.

The city has also seen significant interest from crypto firms following a regulatory crackdown on cryptocurrency in the US.

Hong Kong’s Financial Services and Treasury Minister Christian Hui said last month that more than 80 digital asset companies have expressed interest in setting up a presence in the city from October 2022.

Hong Kong Financial Secretary Paul Chen recently reaffirmed the city’s ambitions for the crypto hub, arguing that the time is “right” for the city to push for Web3 despite recent market volatility.

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