Hong Kong Opens Doors to Retail Trading of Cryptocurrencies from June 1

In a significant development for Hong Kong’s ambitions to become a leading virtual-assets hub, the Securities and Futures Commission (SFC) has announced the finalization of rules that will enable retail trading of cryptocurrencies starting from June 1. This eagerly anticipated move allows licensed exchanges to offer cryptocurrencies such as bitcoin and ether to retail investors, as specified in the rules outlined in the consultation launched earlier this year in February.

According to NIKKEI Asia, the new licensed cryptocurrencies platforms will have the opportunity to apply for a license beginning June 1. The SFC has advised that businesses not intending to pursue licensing should initiate an orderly closure of their operations in Hong Kong. While the SFC confirmed that no cryptocurrency trading platforms for retail investors have been approved yet, it expects licensed firms to start onboarding retail traders in the latter half of this year.

The regulatory framework also includes provisions to tackle fraudulent practices and protect investors. Starting next month, it will be deemed a criminal offense to advertise unlicensed cryptocurrency exchanges, encompassing influential individuals endorsing such platforms. Moreover, individuals employing fraudulent or reckless methods to induce others into acquiring virtual assets will also be held accountable under the law.

Hong Kong’s move towards becoming a global Web3 hub aligns with its objective of facilitating retail access to digital assets. However, authorities have emphasized the importance of implementing robust safeguards to prevent industry meltdowns witnessed in the past, such as the bankruptcy of FTX, formerly the world’s second-largest cryptocurrency exchange.

Eddie Yue Wai-man, Chief Executive of the Hong Kong Monetary Authority (HKMA), emphasized the stringent nature of the regulations during his speech at the Bloomberg Wealth Asia Summit earlier this month. As part of the regulatory requirements, licensed platforms must establish a “token admission and review committee” responsible for overseeing the cryptocurrency tokens they offer. These tokens should be included in at least two credible and investible indices from independent providers, including one with expertise in traditional finance, according to the SFC.