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Hong Kong regulator to issue crypto trading licences with retail investor guard rails

HONG KONG - Hong Kong’s securities regulator said its crypto licensing regime will include measures to protect retail investors as it brings in tougher rules for digital asset companies from June 1.

Hong Kong’s move to allow retail trading in cryptocurrencies has come after a year of turmoil in the sector, with the collapse of crypto exchange FTX in 2022 a major blow.

The new regime requires all trading platforms and exchanges to apply for a licence, failing which fines and jail terms would result.

Operators should also perform client checks to ensure that retail traders from China, where crypto trading is banned, will not be accepted, Mr Keith Choi, interim head of intermediaries at the Securities and Futures Commission (SFC), told a press conference on Tuesday.

“Operators have the responsibility to comply with the laws and regulations in the jurisdictions in which they provide services,” he said.

The SFC has concluded a February consultation on digital asset trading, which proposes various investor protection measures. A total of 152 submissions were received.

Measures include requiring companies to set an exposure limit for retail investors as well as allowing retail trading only in highly liquid tokens that have been issued for at least one year.

The new system also covers the marketing of services from unlicensed platforms.

“It is an offence to issue advertisements related to an unlicensed platform. This would cover (social media influencers) personally promoting services (of these platforms) to Hong Kong investors,” said Ms Elizabeth Wong, head of the SFC’s fintech unit.

On Monday, the International Organisation of Securities Commissions unveiled the first global approach to regulating crypto assets, as the 2022 collapse of FTX fuelled concerns that consumers were not protected.

Still, some investors are undeterred, as the Bitcoin has since recovered 75 per cent to US$27,431 on Tuesday. It has hovered above US$26,000 since the banking turmoil in the United States and Europe in March.

The SFC will start accepting applications from June 1. REUTERS