By
Temitope Olatunji
May 13th, 2024
According to the Financial Services and the Treasury Bureau, virtual assets are receiving global recognition as a form of investment by institutional and retail investors.
The Hong Kong government is considering allowing retail investors access to more crypto services according to a new policy document. Previously, government officials released a supervisory framework for digital asset providers. They told lawmakers that prudence meant allowing only ‘sophisticated investors’ to trade cryptocurrency.
Consequently, only professional investors in Hong Kong with a prescribed minimum net worth can trade on approved locally-run exchanges like BC Group and HashKey.
According to Urszula McCormack, partner at King & Wood Mallesons, the policy also limited services, banned taking potentially advantageous leverage positions, and limited liquidity provision. However, the idea has met with stiff opposition from lawmakers.
According to the lawmakers, retail investors who can’t trade on locally licensed exchanges will trade on unlicensed exchanges overseas. This comment has prompted government officials to reconsider their stance.
As a first move, the regulators are moving to hold a public consultation on allowing retail investors to trade virtual assets (VA). The consultation may also include access to crypto through exchange-traded funds (ETFs).
Access to Virtual Assets for Retail Investors Is the Global Direction
According to the Financial Services and the Treasury Bureau, virtual assets are receiving global recognition as a form of investment by institutional and retail investors. The statement read that “having these products launched in Hong Kong will provide the connectivity between VA players and traditional financial institutions”.
CEO of the Hong Kong Monetary Authority, Eddie Yue, noted that VAs could foster innovation in everything from bond issuance to art ownership. However, Yue warned that embracing VA products was not going to be without safeguards. The regulators hope to improve investor protection and ensure appropriate regulation is in place before introducing new products.
According to SFC Deputy Chief, Julia Leung, “The SFC has been actively looking to set up a regime to authorize ETFs which provide exposure to mainstream virtual assets. These ETFs will have appropriate safety measures to protect customers. Likewise, the exchange must be committed to disclosure, have an investment strategy, and prioritize investor education”.
Meanwhile, the government is also performing multiple virtual assets pilot projects including NFT issuance for Hong Kong Fintech Week, Green bond tokenization, and e-HKD. HK hopes to become the future-forward hub of financial innovations, agile regulations, and the best of international standards and practices.