Hong Kong Plans to Tighten Regulations on Crypto Industry
In an attempt to fight fraud, money laundering, and other issues regarding cryptocurrencies, the Securities and Futures Commission (SFC) of Hong Kong is planning for stricter regulations surrounding exchanges and other crypto bodies, according to the Nikkei Asian Review.
Changing The Status Quo
Because the country is laxer on regulation than China, Hong Kong has become a space for initial coin offerings and other crypto companies to grow. However, extra activity brings with it additional illegal actions. Now, the SFC will require investment groups to acquire a license should their portfolio consist of more than 10% in digital assets. That, and these collectives can only sell products to professional investors.
As of now, exchanges can still test cryptocurrencies in a “regulatory sandbox” before they follow up on obtaining a license. Other regulations will be established in chunks over time.
Because of this, companies can only propose ICOs for assets that fulfill SFC criteria (e.g. having existed for more than a year).
Earlier this year, the SFC went after seven exchanges due to complaints from investors. Holders had issues withdrawing money from their accounts, which caused accusations of fraud and market manipulation. Then, in March, the group went after the Black Cell Technology ICO for “unauthorized promotional activities.”
These issues and more contribute to Hong Kong’s increasing desire to regulate the market. It is one of many countries looking to fight back against money laundering within virtual currency.
Daisuke Yasaku of the Daiwa Institute of Research claims that, while important, the “cost of regulations will be high.” He continues, revealing that most groups may be required to establish an exchange that can often report to authorities.
Timothy Loh, manager of a law firm in the area, states that the “requirements of the SFC initiative may prove too burdensome for some operators” and that some parties may refuse to participate if possible.
It’s a tough balance to achieve. Some claim that high costs prevent investors from getting involved, while others think that regulations will bring in more investors over time.
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