Hong Kong Securities and Futures Commission: Exchange licenses to be issued in June, proposes conditional opening of retail trading.

The Securities and Futures Commission (SFC) of Hong Kong has initiated a consultation on the regulation of virtual asset trading platforms today (20th). The new licensing regime, which will come into effect on June 1, 2023, will require all centralized exchanges to obtain a license from the SFC before operating in Hong Kong. The consultation period will end on March 31st.

Evolution of Hong Kong Licensing! Retail Investors Conditionally Allowed

The initial regulatory proposal originally restricted the use of exchanges to professional investors only; however, in the recent public consultation, the Securities and Futures Commission (SFC) believed that since Hong Kong has accepted three virtual asset futures ETFs, retail investors can indirectly access crypto assets. With many international financial institutions already involved in the virtual asset space, the SFC believes that various types of investors, including retail investors, should be allowed to use licensed exchange services.

Licensed exchanges need to meet basic requirements, as per the consultation suggestions, in an informal version:

• Regulations on establishing business relationships with customers, assessing user risks, and setting limits
• Establishing norms and review systems for listed coins
• Conducting due diligence on listed coins
• Qualified large virtual assets, which may be coins covered by mainstream indices

This license is a regulatory license for the Chinese legal jurisdiction, following Singapore as another exchange regulatory license; as the application for a Singapore license is very difficult, the emergence of a Hong Kong license has been welcomed by both Eastern and Western communities, even sparking a craze for "Hong Kong concept coins."

In Asia, Japan and Singapore already have exclusive licensing systems. In order to comply with regulations such as investor protection and anti-money laundering, restrictions on operators are quite stringent, which may not necessarily provide an explosive boost to the local trading market. However, for operators lacking regulatory certification, they now have an essential badge to obtain.