Hong Kong’s financial regulator has extended its previous guidance, which restricted the sale of spot products to professional investors, thus enabling intermediaries to broaden their services to a wider range of clients.
The policy has been revised in response to recent developments in the market and inquiries from industry players seeking to expand retail access through intermediaries and to permit investors to directly deposit and withdraw virtual assets to and from intermediaries with appropriate safeguards, the Securities and Futures Commission (SFC) noted in a circular released on Friday. This regulatory change comes at a time of growing interest in spot bitcoin exchange-traded funds (ETFs).
JPMorgan recently suggested that the approval of spot bitcoin ETFs in the United States could occur within months, possibly before the January 10th deadline for the Ark 21Shares application. Additionally, it follows the SFC’s allegations against the unlicensed crypto exchange JPEX, leading to arrests and a promise to disclose details of licensed applicants. Notably, Hong Kong remains cautious about overseas virtual asset (VA) products, deeming them complex and therefore high-risk.
The circular states that products related to VAs that are considered complex should only be accessible to professional investors. For instance, an overseas VA non-derivative ETF would likely be classified as a complex product.
Another important requirement is that prospective clients undergo a one-time test to assess their knowledge of investing and their ability to assume the risks associated with virtual asset trading. Intermediaries are also obligated to provide clients with risk disclosure statements.
Hong Kong’s aspirations to establish itself as a virtual asset hub became evident when it introduced a new regulatory framework in June, accepting applications for licenses for crypto trading platforms. The first set of licenses was granted in August, allowing exchanges to cater to retail customers. This marked a significant shift following 18 months of hostility toward cryptocurrencies.
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