The Hong Kong Securities and Futures Commission (SFC) will be working with BitMEX to create clearer regulations for crypto exchanges in the country.
While becoming increasingly common, cryptocurrency regulations can be tricky. How far can authorities actually push the process? Tokens that are deemed as securities can be regulated by certain authorities like the SEC but what about other virtual currencies?
Hong Kong’s Securities and Futures Commission (SFC) believes that an outright exchange ban is not the solution. According to the South China Morning Post, the commission’s chairman, Carlson Tong Ka-shing, explained:
We do not think imposing a total ban on these platforms is necessarily the right approach, and it will not work in today’s Internet world when trading can cross national boundaries. Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets.
Hong Kong to Develop Clearer Regulations
Exchanges are an integral part of the crypto market and while many call Hong Kong home, they are not regulated. Even though they are expected to adhere to SFC regulations, there is no clear framework. However, with cryptocurrency interest and adoption on the rise, the commission is eager to provide clarity. Tong said:
We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities. They do not fit in the custodian, audit or valuation requirements, for instance, normally expected under the Securities and Futures Ordinance. But no other international market currently has a comprehensive regulation framework for these cryptocurrency platforms. We need to see if and how these platforms can be regulated to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected.
Because most authorities have bowed to that fact that their knowledge of this nascent technology is somewhat limited, it is essential to employ an inclusive approach to developing guidelines. This exactly what BitMEX is hoping to do. The COO of the major exchange, and a previous director at the SFC, Angelina Kwan, explained:
We hope the guidelines or regulations being considered will keep pace with market developments. The US has introduced regulations over cryptocurrency and there are futures products being traded by the CME Group and the CBOT. This shows that a regulatory authority can help to develop a new industry.
Kwan added that she would be helping the SFC create the proposed regulations:
We hope that by sharing information about cryptocurrency markets and market developments in this space will help international regulators better understand cryptocurrency as an asset class.
Support from Circle
U.S.-based crypto investment platform Circle is interested to see what the SFC comes up with. Jeremy Allaire, the founder of the firm, which has expanded to Hong Kong, also offered support, saying:
We’ll pay very close attention when new licensing or regulatory frameworks emerge, and will proactively work with the government on those frameworks. We also recognise there are real risks for investors and rules need set in place to deal with those risks. So we try to be constructive in working with regulators in all the markets we are in. Since we started the company, we have given a commitment to collaborating with governments. We want to ensure the long-term potential of the digital asset industry.
There has been a recent push for regulatory authorities to work more closely with crypto industry experts in a bid to find solutions that will be acceptable, and hopefully beneficial, to both parties. In addition, clearer regulations are a definite drawing card for platforms who want to expand. Malta is a well-known example of this. The country has also shown real enthusiasm and acceptance of the industry and, in the process, has attracted platforms like Bitmora and Bittrex to its sandy shores.
Do you think that clearer regulations will increase crypto activity in Hong Kong? Let us know in the comments below!