The financial regulator in Hong Kong has expanded on previous guidelines that restricted the sale of spot products to accredited investors, thereby enabling intermediaries to provide their services to a broader customer base.
“The policy is updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to/from intermediaries with appropriate safeguards,” the Securities and Futures Commission ( SFC ) stated in an announcement.
The regulatory change coincides with growing interest in exchange-traded funds (ETFs) that track spot bitcoin prices. JPMorgan recently stated that the approval of spot bitcoin exchange-traded funds (ETFs) in the United States may occur in a few months, most likely prior to January 10th, which is the last day to submit an Ark 21Shares application. It also follows the authority’s accusations against cryptocurrency exchange JPEX for operating without a licence, declaring that it would release information about applicants who have been granted licences, and making arrests.
The problem here is that Hong Kong continues to view foreign virtual-asset (VA) products as “complex” and hence especially dangerous, so it wants to steer clear of them.
“VA-related products which are considered complex products should only be offered to professional investors,” said the circular. “For example, an overseas VA non-derivative ETF would very likely be considered a complex product.”
The other drawback is that prospective customers would have to take a one-time exam to assess their level of experience with investing and make sure they have enough money to take on the risks associated with trading virtual assets. Additionally, intermediaries would have to give risk disclosure statements to their clients.
When Hong Kong introduced a new regulatory framework in June and began accepting applications for licences to operate cryptocurrency trading platforms, it became clear that the city aimed to become a centre for virtual assets. In August, it approved the first batch of licences, enabling exchanges to provide retail services to clients. After 18 months of animosity towards cryptocurrencies, that was a U-turn.