The regulatory body and central bank in Hong Kong have made changes to their cryptocurrency policy following inquiries from the cryptocurrency industry and have issued new rules in a document regarding the activities of middlemen in the virtual asset sector.
These rules include extra steps aimed at safeguarding retail investors by limiting their ability to invest in what the authorities consider to be complicated cryptocurrency products.
Hong Kong started regulating cryptocurrency assets five years ago by restricting most activities in the market to professional investors. However, since then, the variety of investment products related to virtual assets has grown, and regulators have permitted crypto trading platforms to serve regular, everyday investors.
Now, in response to the changing market and growing interest from industry players who want to offer virtual asset products and services to the general public, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have issued a joint circular to update their policies in this area.
“As these risks are not reasonably likely to be understood by a retail investor, VA-related products are very likely to be considered complex products,” the regulatory institutions said.
The authorities have emphasized that the concerns they raised in 2018 are still relevant today because the rules and regulations for cryptocurrencies are inconsistent worldwide.
The SFC and the HKMA are insists that they need to put in place measures to protect investors who are involved with virtual assets. These measures should go beyond the existing requirements for complex financial products in Hong Kong.
They mentioned examples from other countries, such as crypto exchange-traded funds (ETFs) and exchange-traded products (ETPs), to highlight the need for these protective measures.
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