With the crypto-market seeing many investors foray into the space over the past few years, accompanied by markets in the space going on to face more and more operational challenges due to regulatory uncertainty, Hong Kong’s Securities and Futures Commission [SFC] had introduced licensing laws to respond to investors’ concerns in October 2018.
While this was a positive development for the industry, one year on, there hasn’t been much progress made. According to a recent report, very few crypto-funds have been approved for licensing in Hong Kong.
The report could identify only one platform called Diginex, which is one of the very few fund managers that have been approved to invest in cryptocurrencies. According to Henri Arslanian, Hong Kong-based global crypto-leader at PwC, there has been more interest among smaller crypto-dedicated funds, as opposed to larger ones.
Gaven Cheong, a partner at law firm Simmons & Simmons, said,
“Last year there was a lot of excitement but since then we haven’t seen much activity. Not many new managers in this area have the background, experience or support to mount such an undertaking, and this has meant that many applications never even get started.”
Some have speculated that this could be due to operational and infrastructural issues, rather than the regulator being obstructive, while others believe that the industry being a nascent one is also a factor.
This news comes after Hong Kong’s SFC released a statement in which the watchdogs planned on licensing cryptocurrency exchanges for the first time after it identified significant risks associated with investing in virtual assets. According to the said licensing plan, all funds that invest more than 10% of their portfolios in crypto-assets will be licensed by the SFC.