Hong Kong Mulls Letting Retail Investors Trade Crypto, Removing ‘Professional Investor-Only Requirement’

The director of licensing and head of the fintech unit of Hong Kong’s Securities and Futures Commission (SFC) has confirmed that the regulator is considering allowing retail investors to invest directly in crypto assets. “We’ve had four years of experience in regulating this industry … We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement.”

SFC Director on Crypto Regulation in Hong Kong

Elizabeth Wong, director of licensing and head of the fintech unit of Hong Kong’s Securities and Futures Commission (SFC), talked about cryptocurrency regulation during a panel discussion held by Invest HK on Monday, South China Morning Post reported.

She explained that the regulatory environment for crypto in Hong Kong is different from in mainland China. Emphasizing that Hong Kong can introduce its own bill to regulate cryptocurrencies, she stressed that it “shows just how separate Hong Kong is from the mainland.”

The director confirmed that the SFC is currently considering allowing retail investors to “directly invest into virtual assets.” Over the past four years, the regulator has taken the stance of limiting crypto trading on centralized exchanges to professional investors, which are individuals with at least HK$8 million (US$1 million) in liquid assets, the publication conveyed.

Noting that the crypto industry has become more compliant, the SFC director said:

We’ve had four years of experience in regulating this industry … We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement.

The government of Hong Kong has been increasing efforts to lure back fintech companies that left the city due to strict regulations.

The SFC introduced a regulatory framework for crypto trading platforms in November 2019. Centralized exchanges that provide crypto trading services and intend to offer trading of at least one security token may apply to the SFC for a license. “The licensee must only provide services to professional investors,” the regulator clarified. In December 2020, the SFC issued its first license to a digital asset trading platform. At the time of writing, OSL Digital Securities Ltd. is the only licensee listed on the regulator’s website.

Wong further noted that the SFC has relaxed some requirements to allow retail investors to invest in crypto assets over the past year and the regulator is also reviewing rules on whether to allow retail investors to invest in exchange-traded funds (ETFs) with crypto exposure.

The SFC will seek public comments on allowing retail investors to directly invest in cryptocurrencies later this year, the director revealed, adding that Hong Kong will soon introduce a mandatory licensing requirement for crypto trading platforms.

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