The Hong Kong Securities and Futures Commission (SFC) has released finalized guidelines for virtual asset trading platform operators (VATPs). The guidelines cover financial soundness, market conduct, consumer protection, and AML/CFT measures.
Licensed VATPs in Hong Kong will be able to offer retail investors access to "eligible large cap virtual assets" with suitability assessments and exposure limits. However, retail trading of stablecoins will not be permitted until the HKMA's stablecoin regulatory regime is implemented.
The guidelines have undergone revisions and clarifications based on public feedback. Token due diligence requirements have become more principles-based, and the need for legal advice to confirm tokens as non-security tokens has been removed.
VATPs must maintain insurance and compensation arrangements for custody risks. The required coverage for assets held in cold wallets has been lowered to 50%, while the proposal for 98% of client assets in cold wallets remains unchanged. Private keys must be stored in Hong Kong.
VATPs and their affiliates are prohibited from engaging in proprietary trading or providing services like earning, deposit-taking, lending, and borrowing. However, affiliates are allowed to take positions on other trading venues apart from their related VATP.
Starting June 1, 2023, new requirements for VATPs will be in effect. Eligible entities can benefit from transitional arrangements. Stay updated with circulars, FAQs, and a licensing handbook for guidance on the licensing process at the following link:
bit.ly/436q2WI
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