The Hong Kong Securities and Futures Commission (SFC) has announced plans to update its policies regarding virtual currencies. Under the new guidelines, certain virtual currency products will only be accessible to professional investors, and intermediaries in the crypto space will be required to assess clients' knowledge of investing in virtual assets before facilitating transactions. The SFC's objective is to address evolving market and industry inquiries while also considering virtual assets as complex products.
The Securities and Futures Commission (SFC) of Hong Kong has revealed plans to revise its policies concerning virtual currencies, taking into account recent market developments and industry inquiries. These updated guidelines will bring about significant changes:
1. Access Restrictions: Under the new policies, certain virtual currency products will only be accessible to professional investors, a move designed to ensure that these products are offered to individuals with sufficient knowledge and experience in the field.
2. Knowledge Assessment: Intermediaries operating in the cryptocurrency space will be required to assess their clients' knowledge of investing in virtual assets before facilitating any transactions. This requirement aims to enhance the understanding and awareness of crypto investments among clients.
The SFC acknowledges that while virtual assets have gained popularity in some parts of the world, the global regulatory landscape for cryptocurrencies remains uneven. The risks associated with investing in virtual assets, initially identified by the SFC in 2018, continue to be pertinent.
The updated requirements classify virtual assets as "complex products" under the SFC, subjecting them to similar guidelines as other financial products. Examples cited by the commission include crypto exchange-traded funds (ETFs) and products issued outside Hong Kong.
The move to update these policies comes in the wake of recent challenges faced by crypto users in Hong Kong, particularly the JPEX crypto exchange scandal. In September, the SFC received over 1,000 complaints related to JPEX, involving substantial financial losses for users. The situation led to the arrest of six JPEX employees for operating an unlicensed crypto exchange.
While the direct link between the JPEX case and the SFC's policy updates is not confirmed, the regulator has been committed to raising awareness among crypto investors about the potential risks they may encounter. In October, the Hong Kong Police Force and SFC established a working group to monitor and investigate potential illegal activities involving digital assets.
The revised virtual currency policies by the SFC aim to enhance investor protection and bring more regulatory clarity to the rapidly evolving cryptocurrency space in Hong Kong.
(TURNER WRIGHT, COINTELEGRAPH, 2023)