Clarity into Virtual Assets Industry Will Boost Compliance-driven Development Step by Step

2022-03-25

In a recent blog post, Christopher Hui,Secretary for Financial Services and the Treasury,introduced and detailed Hong Kong’s virtual asset development plan. The plan covered the need to embrace regulation, development, tradition and innovation, representing the willingness of the Hong Kong SAR government and regulatory bodies to promote compliant, safe and healthy development in the industry. The guidelines highlighted not only important directions for industry development, but also provided clarity into business operations and measures for more well-rounded investor protection. The guidelines aimed to create a more favorable environment for innovation within the industry to help Hong Kong become a more competitive market for virtual assets (VA). 

As Hui said, these measures have taken into account the latest development and regulatory trends in the international market as well as our local market situation, covers three areas, namely (1) establishing a licensing regime for the VA service providers (VASPs); (2) contemplating the regulation of payment-related “stablecoins”; and (3) providing traditional financial institutions (FIs) with guidelines on offering VA-related services to clients.

A few VA-related derivative products are traded on regulated exchanges specified by the SFC such as ETF, and it is not necessary to impose the “professional investors only” restriction on the distribution of such products as long as existing rules are observed and additional safeguards are in place. We believe opening digital asset market towards retail clients in an orderly way aligns with the market expectation. 

At the same time, Huobi Technology Holdings Limited (“Huobi Tech”) upholds the principle of compliance first, and is applying for virtual asset and finance-related licenses in major markets around the world. Up to now, Huobi Tech’s subsidiaries have successfully obtained the approval to conduct Type 4 (Advising on Securities) and Type 9 (Asset Management) regulated activities from The Securities and Futures Commission of Hong Kong (“HKSFC”), registered as a Trust Company in Hong Kong with the Trust or Company Service Provider License (Hong Kong) and the Retail Trust Company License (Nevada USA). We are confident of Hong Kong's future position in the virtual assets sector, and will continue to actively cooperate with the regulatory authorities to promote the development of Hong Kong's industry.  

Through its own endeavors, Huobi Tech will take more corporate responsibilities to spur regulation and progress within the industry. Huobi Tech co-founded the Crypto Market Integrity Coalition ("CMIC"), an industry-defining collaboration of industry p s focused on combating market abuse and manipulation to support the cultivation of a fair digital asset marketplace, jointly with other leading crypto firms like Coinbase, and Huobi Tech is the only Asian founding coalition member. The coalition, which introduces a pledge of commitment to safer markets and working with regulators, will prioritize the building of public and regulatory confidence in virtual asset classes. We believe that the development of compliance in the virtual assets industry will not only be driven by regulatory agencies, but also be shaped by the internal demands of the leading industry p s. 

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