The SFC (Securities and Futures Commission) in Hong Kong has revealed that it is considering how to best approach the regulation of the many crypto platforms currently operating within its jurisdiction.
Over the last few months, the SFC has been issuing warnings to the general public asking citizens to be mindful of trading on these exchanges because they are not directly regulated. In addition to this, the Securities and Futures Commission has also been reminding Hong Kong-based exchanges that they must operate according to governmental regulations.
With the local government’s ever-increasing focus on digital currencies, this has led to a growing feeling of anticipation from investors, as many believe that either plans to regulate cryptos or to place an outright ban on them are inevitably in the cards.
For Hong Kong-based crypto investors and exchanges alike, however, today’s announcement should be seen as good news. The SFC’s outgoing chairman, Carlson Tong Ka-shing recently expressed to the South China Morning Post that he is in support of finding ways to regulate the industry in a bid to protect Hong Kong investors from fraud, money laundering, and other illicit acts.
An Outright Ban on Cryptos Has Been Ruled Out
In the aforementioned interview, Tong said that an outright ban on cryptocurrencies is not the solution; a statement that has calmed the nerves of those who feared the worst.
He also made no secret of the fact that implementing regulations will not be easy because cryptocurrency exchanges are newfound innovations. And as such, they may not fall under the same category as securities, which will disallow the SFC to take action on these crypto platforms.
More specifically, the exchange’s structures do not fit into the Securities and Futures Ordinance valuation requirements, audit, or custodian groupings. However, the alternative to a ban means Tong and his team will need to find a regulatory solution that will require cooperation from the crypto exchanges to come up with an amicable solution.
On top of this, he pointed out that there are no frameworks set the agendas of other countries to follow suit. Therefore, the solution is to find a regulatory standard that takes a similar approach used to regulate other trading venues, while still ensuring that investors are fully protected.
Hearing this news will have lifted the spirits of Hong Kong-based crypto exchanges because Tong comes across as positively optimistic, despite the undoubtedly difficult road ahead.
Proposed Regulations Have Been Welcomed by Hong Kong Exchanges
BitMEX’s chief operating officer, Angelina Kwan, has said she will work with the SFC to finalize the proposed regulations. She mentioned that there are regulations in the U.S. that have helped companies trade in future products.
She specifically mentioned CME Group and the CBOE as supporting examples of how crypto exchanges and regulations can coexist and develop. She added that by sharing cryptocurrency and market information, along with any developments, regulators may become increasingly convinced that digital assets are truly their own asset class.
The U.S.-based Circle’s founder and chief executive, Jeremy Allaire, has also welcomed the SFC’s announcement. Circle only just recently opened up over-the-counter crypto asset trading venues in Asia, with a focus being put on Hong Kong’s market.
Allaire understands that Circle is operating in an unregulated market, which is common for nearly all cryptocurrency-based business models. However, he said that the company will proactively work with the SFC in Hong Kong when new licensing frameworks develop.
On a positive note, Tong is looking for solutions, in comparison to ways to push the exchanges out of the country. So for now, fears that Hong Kong may ban cryptocurrencies after giving in to pressure from China have at least been quashed. The exchanges seem to be breathing a sigh of relief by offering to cooperate with the government as a gesture of goodwill.
Now, the SFC and local exchanges will need to work together to establish a regulatory framework and licensing system that will keep pace with current market developments in a bid to make blockchain technologies a permanent fixture in Hong Kong’s future economy.