After months of warning the industry about imposing more stringent cryptocurrency laws, Hong Kong has finally laid out the new legal framework to regulate the same, reports CCN. Hong Kong Securities and Exchange Commission (SFC) is tightening cryptocurrency laws in the light of the recent rise in cryptocurrency related criminal activities and money laundering across South Asia.
Hong Kong has been one of the world’s leading financial epicenters, but it has one of the least stringent regulations in the region. Most of the countries are tightening their stance on cryptocurrencies presently, and it was imperative that the country followed.
The SFC in the statement released on their website said that the public interest in virtual assets had multiplied many folds since last year. Citing the need for such laws, the statement explained: “While virtual assets have not posed a material risk to financial stability, there is a broad consensus among securities regulators that they pose significant investor protection risks.”
An investment fund of 10% or more of digital assets will happen only if you have a license, as per the new law. The companies also are constricted to sell their products to only professional investors. The SFC would also be instituting a voluntary scheme where exchanges will be able to test their digital assets to decide whether they would need to seek a license or not. It is being called a “temporary regulatory sandbox.” This new stance of the SFC puts a major portion of all virtual assets under the interpretation of “securities” or “futures contracts.” Also, the firms, managing funds which solely invest in virtual assets that do not constitute “securities” or “future contracts,” will be required to acquire a license for dealing in securities as well as the distribution of these funds in Hong Kong.
Many in the industry support the important and long-awaited regulations as this would safeguard investors and stop the unregulated reign of the crypto industry. Governments do not back virtual assets, and hence, the assets do not have an intrinsic value which makes them extremely capricious. Their prices are driven by supply and demand. Cyber-attacks hacking on virtual asset trading platforms and thefts of virtual assets are on the rise. Also, the anonymity of these assets has enabled many unscrupulous activities such as money laundering, terrorist financing, and fraud.
But some also believe this would not be such a wise idea. “The cost of regulations will be high. The requirements of the SFC initiative may prove too burdensome for some operators.” Daisuke Yasaku, Researcher at Daiwa Institute of Research, said indicating that it might constrain the adoption of cryptocurrency by the wider public.