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Hong Kong may allow retail traders access to digital currency exchange services

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The Hong Kong Securities and Futures Commission (SFC) has confirmed its intent to allow retail users to interact with digital assets in its incoming regulatory framework if service providers comply with its guidelines.

The SFC made the disclosure in a public memo marking the end of a consultative process of digital currency trading in the region. In its advisory, the securities watchdog said it received over 150 submissions from industry stakeholders supporting a proposal to allow exchanges to serve the local retail market.

The SFC stated that it would move forward with the proposal by implementing “robust measures” to protect retail investors from the dangers associated with digital currencies. The measures include ensuring token due diligence, proper onboarding process, regular disclosures, and good governance.

Providing clear regulatory expectations is the key to fostering responsible development, Julia Leung, head of the SFC, remarked. “Hong Kong’s comprehensive virtual assets regulatory framework follows the principle of ‘same business, same risks, same rules’ and aims to provide robust investor protection and manage key risks.”

The incoming rules for digital asset service providers are expected to come into effect on June 1, but the SFC is yet to give the nod to any exchange to cater to the retail market. The rules deal exhaustively with the issues of cybersecurity standards, safe custody of assets, and resolving conflicts of interest that may arise in offering services to Hong Kong’s clients.

“Operators of virtual asset trading platforms who are prepared to comply with the SFC’s standards are welcome to apply for a license,” SFC said. “Those who do not plan to do so should proceed to an orderly closure of their business in Hong Kong.” 

Hong Kong’s regulators have expressed confidence in the incoming legal framework, saying that it will be key in transforming the region’s digital landscape. Over 80 digital asset firms have indicated a desire to establish operational bases in the region, lured by the government’s positive stance.

An array of positives 

Hong Kong’s local Web3 industry has been hit with many positives in recent weeks, including the launch of a new fund to trigger growth in the industry. A new Web3 institute recruited the former head of the Hong Kong Monetary Association (HKMA) to steer its affairs amid plans to attract global service providers to the country.

The government urged banks in the region to offer financial services to the Web3 firms, reminding them to be “transparent, reasonable, and efficient.” Chinese banks have also waded into the space to offer banking services to Hong Kong’s Web3 firms in the face of a glut in global financial services to the industry. 

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