In late 2018, the Hong Kong Securities and Futures Commission (SFC) introduced licenses to cryptocurrency funds and related investment managers allowing them to sell digital asset products to their customers. One year in since the announcement, a number of fund managers have complained that the authorities are frustrating their efforts to carry out their businesses. In lieu to this, the authority is focusing on creating a new regulatory framework for crypto.
A Very Few Fund Managers in Hong Kong Granted Licenses
According to a Reuters report, very few managers have since been able to acquire the licenses from the SFC as the government looks to protect investors from virtual currency scams. One of the CEOs of the few digital asset funds in the country to gain approval, Diginex, Richard Byworth, approves of the government actions as he feels that it builds the trust of investors.
“We believe it is vital to be regulated to build trust with our clients but also in the industry.”
Hong Kong companies leaving for off-shore jurisdictions
The stringent jurisdictions by the SFC are forcing Hong Kong based funds to domicile abroad. Market participants are finding home abroad citing the tough regulations in Hong Kong as a reason. The move seems judicious as offshore jurisdictions offer a friendlier environment to carry out operations.
While stringent laws are a factor causing the massive exodus of crypto based funds, analysts also say that the relative infancy of the market is also a factor as crypto funds still developing systems for custody, audit, cybersecurity and other operational necessities.
Rocky Mui, a partner at Clifford Chance in Hong Kong, said,