Hong Kong Regulators Release New Guidelines for Virtual Asset Activities
Hong Kong’s Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) have issued new guidelines to regulate virtual asset-related activities in response to market developments. In a recent circular, the regulators addressed issues related to the distribution of digital asset products, asset dealing services, asset management services, and advisory services.
One significant change is that the SFC and HKMA have expanded access to virtual asset products beyond professional investors. They now allow a wider range of clients to invest in these assets. This policy update reflects market developments and industry requests for increased retail access while ensuring appropriate safeguards are in place.
This announcement comes after concerns raised by local regulators following the JPEX incident. The Commissioner of Customs and Excise in Hong Kong called for market scrutiny after the saga, which prompted the need for policy changes to cater to local investors.
Investor Protection Measures
The circular also outlines investor protection measures for intermediaries offering virtual asset-related products. While some restrictions still apply, intermediaries can offer certain virtual asset products only to professional investors. For retail clients, intermediaries must assess their knowledge of these products before providing them with investment opportunities or trading on their behalf.
If a client lacks sufficient knowledge, the intermediary must provide appropriate training on cryptocurrencies and related products before proceeding with any transactions. Professional investors are exempt from these requirements.
Solicitation and Due Diligence
Intermediaries are required to comply with all selling restrictions within the jurisdiction and refrain from offering unapproved products. When making solicitations or recommendations, intermediaries must ensure that the products they offer are suitable for their clients’ best interests, considering factors such as financial status and risk tolerance.
Additionally, intermediaries must ensure that all parties involved understand the key details of agreements. Except for institutional clients, risk disclosures must be provided to clients in a clear and easily comprehensible manner.
Hot Take: Hong Kong Regulators Adapt to Market Demands
Hong Kong’s financial regulators, the SFC and HKMA, have responded to market developments by releasing new guidelines for virtual asset activities. These guidelines aim to address concerns regarding the distribution of digital asset products and provide investor protection measures.
The most significant change is the expansion of access to virtual asset products beyond professional investors, allowing a wider range of clients to invest in these assets. This policy update reflects the industry’s demand for increased retail access while ensuring appropriate safeguards are in place.
By implementing these guidelines, Hong Kong is adapting to market demands and seeking to protect investors in the evolving crypto landscape.
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