Securities and Futures Commission

Hong Kong Regulator Receives First Application for Bitcoin Exchange-Traded Fund (ETF): Report

January 30, 2024 The Daily Hodl

Hong Kong establishes task force to advance Web3 development

July 2, 2023 Coin Telegraph

The task force will advise on the “sustainable and responsible” development of Web3 in Hong Kong, according to the statement.

As part of Hong Kong's ongoing commitment to embrace the "megatrend" of Web3 development, it has established a diverse group of industry and government officials to supervise the progress of Web3 in the region.

According to a June 30 statement, the government of Hong Kong has formed a task force comprising 15 industry participants and 11 key government officials to oversee the development of Web3, with a particular focus on promoting its growth in an ethical manner. It stated:

“The Financial Secretary has announced in the 2023-24 Budget the establishment of the Task Force to provide recommendations on the sustainable and responsible development of Web3 in Hong Kong.”

The Govt announces the establishment of the Task Force on Promoting #Web3 Development https://t.co/wrC1DmE2QD
— Hong Kong SAR Government News (@newsgovhk) June 30, 2023

Paul Chan, Hong Kong’s financial secretary said that the task force will only further enhance Hong Kong’s aim to be a frontrunner in the Web3 sector.

“Hong Kong seeks to lead and drive innovative exploration and development, create more new application models, and strives to draw together top-notch companies and talent in the arena to build a thriving ecosystem” Chan stated, adding:

“With the Task Force bringing together leaders and professionals in the sectors involved, I believe their valuable advice will help Hong Kong develop into a Web3 hub.”

It was highlighted that the market has “responded favorably” to the Hong Kong government policy statement on the development of virtual assets, which was released in October 2022.

Cointelegraph reported on March 20 that over 80 virtual asset-related companies have expressed interest in “establishing their presence in Hong Kong” since the release of this statement.

The Hong Kong government has been actively promoting the region as an attractive place for crypto firms in recent times.

On June 10, Johnny Ng, a Hong Kong Legislative Council member took to Twitter to extend an invitation to "all global virtual asset trading platforms" to come to Hong Kong and apply for a virtual asset service provider license.

He mentioned crypto exchange Coinbase specifically, amid the United States Securities and Exchange Commission taking legal action against the exchange just days earlier on June 6.

I hereby offer an invitation to welcome all global virtual asset trading operators including @coinbase to come to HK for application of official trading platforms and further development plans. Please feel free to approach me and I am happy to provide any assistance. pic.twitter.com/bcIi1IjMlc
— Johnny Ng 吴杰庄 (@Johnny_nkc) June 10, 2023

This comes after the Hong Kong Securities and Futures Commission (SFC) announced on May 23 that it would soon allow licensed platforms to cater retail investors.

It was stated operators of virtual asset trading platforms willing to adhere to the SFC’s proposed guidelines are encouraged to submit license applications.

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HashKey launches wealth management service, citing ‘significant’ demand

April 14, 2023 Coin Telegraph

bsg

Hong Kong’s HashKey recently received a number of licenses from local regulators, allowing it to expand its range of products and services.

Hong Kong-based digital asset firm HashKey Group has launched a new wealth management platform geared toward professional and institutional investors.

In an April 14 announcement, HashKey cited “significant demand from investors to access virtual assets” as the reason for its move into the wealth management space.

Deng Chao, the CEO of the group’s venture capital arm, HashKey Capital, said the service allows it to offer solutions to help tap into the “growing opportunities of virtual assets.”

HashKey pointed to a 2022 study from consultancy firm Boston Consulting Group, which found 0.3% of individual wealth is invested in crypto compared to the 25% invested in equities.

*A screenshot from BSG’s 2022 report highlighting the growth potential for crypto. Source:* *BSG*

It claims this signals there is “potential robust demand for virtual assets in the future,” a sentiment that was shared by BSG when it initially published the report.

On Sept. 13, HashKey announced that it had been granted a “Type 9 asset management license” by Hong Kong’s Securities and Futures Commission, allowing it to manage portfolios that only contain virtual assets and likely paved the way for its latest offering.

In the latest announcement, HashKey also noted that “recent challenges in the crypto market have highlighted the need for deep and reliable liquidity.”

In response, HashKey said it would be expanding its over-the-counter trading service by expanding the number of tokens in its spot market and increasing its liquidity coverage to 24/7.

On Jan. 17 HashKey closed a $500 million investment round for a fund that it plans to use to help push for mass adoption of blockchain and crypto technologies.

We're delighted to share that @HashKey_Capital successfully closed its Fund III, having raised a total of $500 million.

The Fund will be deployed to advance global #crypto and #blockchain initiatives, focused on building and scaling the #Web3 ecosystem.https://t.co/qjq3ur0N7F
— HashKey Group (@HashKeyGroup) January 17, 2023

Cointelegraph contacted HashKey for comment but did not immediately receive a response.

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Over 80 crypto firms eyeing presence in Hong Kong: Financial Secretary

March 20, 2023 Coin Telegraph

Christopher Hui

Since October, more than 80 virtual asset companies have expressed interest in establishing in the city, while 23 have indicated actual plans of doing so.

More than 80 virtual asset-related firms across Mainland China and foreign nations have expressed interest in establishing a presence in Hong Kong, amid efforts from the city to become a leading hub for Web3.

In a March 20 speech in Hong Kong, the Secretary for Financial Services and the Treasury, Christian Hui, stated that Hong Kong is attracting “interest” from various crypto firms across the world since last October.

Hui noted that since the Hong Kong government released its policy statement on Virtual Asset’s Development in October 2022, over 80 virtual asset-related companies have expressed interest in “establishing their presence in Hong Kong,” as of the end of February 2023.

He added that 23 crypto firms have already indicated that “they planned to establish their presence” in the thriving city. The firms included virtual asset (VA) exchanges, blockchain infrastructure firms and blockchain network security firms.

Christopher Hui, Secretary for Financial Services and the Treasury Bureau, delivers the opening keynote and reinforces HK government’s vision to develop the virtual asset sector in Hong Kong.
He mentions Web 3 presents a paradigm shift to the internet era. pic.twitter.com/9MGkWOCj0O
— Everest Ventures Group (EVG) (@EVG_Ventures) March 20, 2023

Hui noted that these companies were interested to learn more about the “implementation details” of the policy statement, as well as regulatory requirements, visa requirements for talent admission as well as targeted support measures for the virtual assets and Web3 sector.

Hui said that Hong Kong already has over 800 fintech companies and that it is “well-positioned” to be a leading hub for Web3, noting this year’s budget allocation of “$50 million” to “expedite the Web3 ecosystem.”

Hui further reiterated Hong Kong's plans to establish a licensing regime for virtual asset service providers in June 2023. He suggested this could lead to more crypto firms flocking to Hong Kong, noting:

“Through the establishment of a comprehensive and clear regulatory system, we are expecting more quality VA enterprises to set up businesses in Hong Kong or to seek development opportunities in Hong Kong.”

Hong Kong’s Securities and Futures Commission (SFC) is currently accepting submissions for feedback on its licensing regime as part of a consultation process that will continue until March 31.

It proposed that all centralized cryptocurrency trading platforms operating in Hong Kong must be licensed with the regulatory body.

Hong Kong outlines upcoming crypto licensing regime

February 20, 2023 Coin Telegraph

Coin Telegraph

Hong Kong’s Securities and Futures Commission calls for public consultation over plans to allow licensed cryptocurrency exchanges to serve retail investors.

Hong Kong’s Securities and Futures Commission (SFC) calls for public feedback on its newly proposed licensing regime for cryptocurrency exchanges set to take effect from June 2023.

A key consideration of the public consultation window is whether to allow licensed exchanges to serve retail investors in the country and what measures should be implemented to provide a range of “robust investor protection measures.“

The SFC announced the consultation process on Feb. 20, outlining a new licensing regime for the industry which proposes that all centralized cryptocurrency trading platforms operating in Hong Kong must be licensed with the regulatory body.

The SFC’s proposed regulatory guidelines are based on existing requirements for licensed securities brokers and automated trading venues, while modifications have been made to some of the existing prerequisites.

A statement from SFC CEO Julia Leung highlighted the “recent turmoil” in the cryptocurrency ecosystem and the collapse of industry players like FTX as a primary reason for clear regulatory guidelines for the industry with investor protection top of mind:

“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle.”

According to the announcement, any person or business providing cryptocurrency-related services must apply for a license from the SFC. Furthermore, a number of requirements are set out for cryptocurrency exchanges and service providers.

This includes a host of prerequisites, including the safe custody of assets, Know Your Customer, conflicts of interest, cybersecurity, accounting and auditing, risk management, Anti-Money Laundering/counter-financing of terrorism and prevention of market misconduct.

Businesses that intend to continue operating and applying for a license are encouraged to review and revise existing systems and controls to meet the requirements of the upcoming regime. Exchanges and service providers that do not intend to apply for a license will have to prepare to close down their businesses in Hong Kong.

Hong Kong’s SFC also intends to publish and maintain a list of licensed cryptocurrency exchanges and service providers to inform the general public of the registration statuses of different firms.

The 361 page document is exhaustive, outlining the key proposed regulatory requirements for licensing as well as guidelines for implementing AML controls and a host of other obligations for the industry.

Perhaps most pertinent is a section related to the proposal to allow retail access to licensed cryptocurrency trading platforms. The existing Securities and Futures Ordinance (SFO) regime has been in place since 2018, which initially restricted SFO-licensed platforms to serving professional investors.

The documentation notes that feedback from the public has highlighted the belief that denying retail access to cryptocurrency markets may result in investor harm given that individuals may be pushed to trade on unregulated overseas platforms which are accessible online.

According to the SFC, just two trading platforms are currently licensed under the SFO, while the SFC has introduced cryptocurrency-focused policies that have facilitated gradual retail investment to limited cryptocurrency asset exposure.

In October 2022, the SFC authorized a regime for cryptocurrency futures exchange-traded funds, giving retail investors indirect access to these markets through regulated products.

Meanwhile a number of licensed brokers and fund managers have begun offering cryptocurrency- related services to investors under the SFC’s supervision. This has been another key driver in the SFC’s move to allow all types of investors to have access to cryptocurrencies through licensed platforms from June 2023.

As previously reported by Cointelegraph, Hong Kong-based financial service providers had begun to enquire about licensing requirements after an amendment to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in December 2022.

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