Crypto Hub in the Making: Hong Kong Pushes Forward with Plans for Retail Crypto Trading
In a push toward reclaiming its position as the world's crypto hub, Hong Kong has outlined plans to allow retail investors to trade certain digital currencies on licensed exchanges.
On Monday, Hong Kong's Securities and Futures Commission (SFC) published a consultation paper on its proposed regulatory regime for crypto trading platforms. The new rules are set to come into effect starting in June and will require all crypto platforms to be licensed by the SFC.
The regulator also said that retail investors would be allowed to trade certain “large-cap tokens” on licensed exchanges, given that safeguards such as knowledge tests, risk profiles, and reasonable limits on exposure are put in place.
The agency did not specify which large-cap tokens would be allowed. However, a report by the FT claimed Bitcoin and Ethereum, the two largest cryptocurrencies by market cap, would be opened up to retail customers.
The SFC also put forward criteria for which cryptocurrencies would be available for trading. Exchanges would be responsible for vetting the team behind a token, marketing materials, and legal risks, and finding out "how resistant it [the token's network] is to common attacks." Furthermore, the token should have a relatively large market capitalization.
The agency defined large-cap virtual assets as tokens "which are included in at least two 'acceptable indices' issued by at least two independent index providers," one of which should have experience in the traditional financial sector.
It is worth noting that crypto exchanges are required not to store more than 2% of their client assets in “hot wallets,” which is a type of wallet that is accessible online. That is because these wallets are more vulnerable to hacks or phishing
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