Fengyi also offered several clues related to the future of crypto trading in the region. She also added that the SFC had the mandate to expand the scope under which it supervised cryptocurrencies in the region, especially in unlicensed digital asset trading.
SFC Lacks Oversight on Crypto
In a publication from ETNet, a local newspaper, Fengyi stated that cryptocurrencies are not categorized as securities or payment methods; hence their oversight cannot fall under the SFC. Because of a lack of a clear regulatory framework, investors who join the sector have been prone to major losses.
Hong Kong allows the trade of cryptocurrencies, but the transactions related to the same are heavily scrutinized. Government regulators have formulated proposals that limit trading to professional investors and require special licenses.
Because of the increased regulatory risk for exchanges operating in Hong Kong, exchanges in the region have been ceasing their operations or limiting their services. In June this year, Futu, a brokerage firm in Hong Kong, announced it would halt crypto futures trading because of the services’ regulatory issues. In August, leading crypto exchange, Binance halted derivatives trading in the region.
Hong Kong’s Restrictions on Crypto
In May, regulators in the region stated that exchanges operating in Hong Kong would have to seek the required licenses. The regulators also added that exchanges would only be permitted to offer crypto trading services to professional investors.
Since 2020, the Hong Kong Financial Services and the Treasury Bureau (FSTB) have been developing new guidelines for the crypto sector. The FTSB had earlier stated that the decision to restrict crypto trading services to professional investors would play a great role in enacting the changes in licensing.
The new announcement comes as financial technology firms and crypto industry players have vehemently opposed the decision to ban retail traders from accessing crypto services. Those opposing the move have stated that the restrictions would push retail investors into using unregulated platforms and lead to exchanges stopping their operations in the region.
The law stated that a professional investor is the one who holds over $1 million in crypto assets. This law will lead to a significant population being banned from trading cryptocurrencies in regulated exchanges.
The Asian region has been active in the crypto sector, which has led to many exchanges seeking licenses in countries within this region. China has been strict about cryptocurrencies, with the country cracking down on crypto mining and banning banks and payment firms from offering crypto-related services.
On the other hand, Singapore requires licenses from exchanges operating in the country. However, the country allows retail investors to engage in cryptocurrencies. The changing regulatory landscape in Asia comes as the crypto market continues to experience growing retail and institutional adoption.
The Asian region has not been the only one battling with how to regulate cryptocurrencies. Governments around the world have been enforcing new measures to protect investors in this sector and prevent money laundering.
The news also comes as the crypto market is experiencing a sudden pullback that has led to Bitcoin falling from new monthly highs of $52K to around $45K. Ethereum had almost retested the $4000 but has retreated to $3300 within 24 hours, according to data from Coinmarketcap.