Hong Kong’s Securities and Futures Commission has established a new regulatory framework that allows crypto exchanges to opt-in to be licensed and regulated. Starting Wednesday, centralized trading platforms can apply for a license, providing they meet certain requirements including adequate measures for the safe custody of assets, insurance, hot and cold wallets, and private key management.
An Opt-In System
The Hong Kong Securities and Futures Commission (SFC) published a new regulatory framework for crypto exchanges on Wednesday. CEO Ashley Alder explained that the commission met with a number of crypto exchange operators after unveiling a conceptual framework that could be used to regulate crypto exchanges last year. “After an in-depth examination of the unique technical and operational features of these platforms, we finally concluded that some could be regulated by us,” he remarked.
SFC CEO Ashley Alder
The commission has been focusing on whether to regulate crypto exchanges. Alder elaborated, “We saw this as a priority because this type of platform has proliferated in Hong Kong and up to now has largely escaped any form of regulation,” adding that it is largely because crypto assets fall outside the legal definition of securities and futures contracts. Since bitcoin and other cryptocurrencies are not securities and “nothing in our new framework alters this position,” he admitted that the SFC can only regulate those platforms that choose to include at least one security crypto asset or token for trading. “But once this happens our new rules will apply to all platform operations, even if the vast majority of other virtual assets traded on the platform are not securities.” The CEO clarified:
So this, essentially,