New regulations for virtual currency exchanges to be enforced
Hong Kong’s Securities and Futures Commission (SFC) announced on the 23rd that it had completed a consultation on the regulation of cryptocurrency exchanges.
The consultation has ended, and the new virtual currency exchange regulations will be enforced from June 1, as previously reported. Individual investors will also be allowed to trade virtual currencies, but thorough investor protection will be introduced through measures such as introducing a licensing system.
The SFC had solicited public comments on the new regulatory rules for about a month until the end of March. A total of 152 comments were submitted during this period. Most opinions were in favor of a licensed exchange offering services to retail investors, he said.
According to the responses to the public offering, one of the rules that SFC imposes on virtual currency exchanges is the content of listed stocks. Specifically, stocks that individual investors can trade must have a high market capitalization and be included in at least two independent indices.
This means, for example, that Bitcoin (BTC) and Ethereum (ETH), which are included in both the Nasdaq and Bitwise indices, can be listed.
It also stipulates that retail investors cannot use stablecoins until the stablecoin regulations are in place sometime between 2023 and 2024. This warns of the risk that prices will no longer remain stable and investors will not be able to redeem them.
What is a stablecoin
A cryptocurrency whose price is always stable. Various stablecoins have been developed whose value is backed by legal currency or virtual currency, or whose price is stabilized by algorithms.
connection: What is a stablecoin that even beginners can understand | Explain features and use cases
In addition, even an exchange that has a business license cannot provide interest rate or lending services. It also said it would not be possible to give “gifts” related to the trading of specific stocks. This gift is expected to include airdrops (free distribution).
SFC CEO Julia Leung commented on the announcement:
Hong Kong’s comprehensive cryptocurrency regulation aims to achieve investor protection and risk management based on the principle of applying the same rules to the same business and the same risks.
With this new rule, we want to develop the industry in a sustainable way and support innovation.
Some experts believe that Hong Kong’s new cryptocurrency regulations could serve as a test of whether China will approve cryptocurrencies in the future.
Becoming a cryptocurrency hub
Hong Kong has shown its willingness to become a cryptocurrency hub, even as cryptocurrencies face headwinds such as the FTX bankruptcy. In December last year, Bitcoin and Ethereum ETFs (Exchange Traded Funds) were listed on the Hong Kong Stock Exchange.
connection: Hong Kong’s first Bitcoin/Ethereum ETF to be listed today
Also last week, it was reported that Chinese state-owned company Greenland plans to apply for a license to operate a cryptocurrency trading business in Hong Kong.
Greenland Financial Technology Group, a subsidiary of Shanghai’s largest real estate developer Greenland Holdings, which is 46.4% owned by the Shanghai Municipal Government, is trading cryptocurrencies, NFTs (non-fungible tokens), carbon credits, etc. It is said that it will obtain a license with the aim of providing services.
connection: Chinese state-owned company Greenland aims to offer cryptocurrency services in Hong Kong