Hong Kong’s Securities and Futures Commission (SFC) is planning to introduce cryptocurrency regulations, according to a report by the South China Morning Post (SCMP).
The watchdog’s outgoing chairman, Carlson Tong Ka-shing, told SCMP that imposing a blanket ban on cryptocurrency exchanges — similar to what China has done — “is not necessarily the right approach.” There are currently a few cryptocurrency exchanges operating in Hong Kong, such as Gatecoin, but they do not come under any regulation.
He added that because cryptocurrency trading takes place over the internet, a total ban on domestic crypto platforms would merely force investors to trade cryptocurrency at overseas exchanges instead.
Tong said that SFC is carefully considering their approach to crypto regulations as “they are new technology and may not qualify as securities.”
“They do not fit in the custodian, audit or valuation requirements, for instance, normally expected under the Securities and Futures Ordinance,” he said.
There is also no framework to emulate as there are no countries which have a comprehensive cryptocurrency regulation system in place.
“We need to see if and how these platforms can be regulated to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected,” he said.
In recent months, the SFC has issued public warnings on the volatility and risks of trading on cryptocurrency platforms.
News of SFC’s proposed plans has been welcomed by the local crypto community. Angelina Kwan, COO of BitMEX, told SCMP that she hoped the measures introduced will “keep pace with market developments.”
She added that collaboration between regulators and crypto platforms can promote greater understanding of cryptocurrency as an asset class as well as its developments in the markets.
Jeremy Allaire, founder and chief executive for US-based cryptocurrency unicorn Circle, said that he is aware that there need to be rules to protect crypto investors.
“We’ll pay very close attention when new licensing or regulatory frameworks emerge, and will proactively work with the government on those frameworks,” said Allaire.