Hong Kong’s SFC Issues Tougher Crypto Regulations in Response to Changing Market Conditions

The SFC has revised its crypto laws to cater only to institutional investors and to recast the roles of intermediaries in the crypto market.

The new regulations are a response to the JPEX scam and will see virtual assets categorized as “complex products,” making them more similar to conventional forms of currency.

The Securities and Futures Commission (SFC) in Hong Kong has released updated regulations for the custody and exchange of virtual currencies in light of shifting market trends and suggestions from professionals in the field. These adjustments, proposed in the wake of a catastrophic crypto exchange failure, promise a paradigm shift in the city’s approach to cryptocurrency.

Particular forms of digital money are the focus of the new rules. The change is meant to protect novice retail investors from the market’s inherent dangers.

The role of intermediaries, who are often the first point of contact for prospective investors, will also be dramatically altered. Because of their prominence in the cryptocurrency industry, they will be responsible for educating their customers on the cryptocurrencies they provide. The SFC wants to guarantee that only well-informed choices are taken in the crypto ecosystem, consequently it is laying this obligation on intermediaries. Potentially useful in lowering instances of buyer’s remorse and major losses.

The comments made by the Commission also illuminate the discrepancies in the international regulatory environment pertaining to cryptocurrencies. The SFC was concerned about the lack of uniformity in the regulation of digital assets because of the many dangers it warned about in 2018.

With this move, the SFC effectively elevates virtual assets to the same status as their more conventional financial equivalents. As “complex products,” these holdings are now subject to the Commission’s regulations. Potential investors will feel better at ease knowing that virtual assets will be subject to the same degree of regulation as more conventional financial products.

New laws define “complex products,” and use the example of crypto exchange-traded funds and items that originate outside of Hong Kong’s borders. This explanation provides a road map for the future treatment of diverse virtual assets, helping to eliminate uncertainties in the purchase, sale, and administration of these assets.

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