The funds that enter the crypto market would also be under review by the authorities. Only professional investors could manage cryptoactive portfolios

The Hong Kong Special Administrative Region of the Republic of China announced some proposals, this Thursday, with the objective of “protecting” investors and formalizing the control of cryptocurrency’s financial sector.

The Securities and Futures Commission (SFC) spread the suggestion, which is aimed at some of the operations conducted by cryptocurrency exchange houses and the investment portfolio managers.

According to the document, exchange houses will have rules similar to those that are applied to automated trading services, which allow investors to copy or reproduce the operations of others.

Another possible regulation is that only professional investors could manage cryptoactive portfolios in that Asian territory. To explain it better, SFC made a “declaration on the regulatory framework for virtual asset portfolios managers, fund distributors, and trading platform operators”, in which it clarifies that, although virtual assets do not represent a risk for financial stability, regulators of securities prefer to avoid any risk and protect investors.

The funds that enter the crypto market would also be under review by the authorities. Ashley Alder, SFC’s Executive Director, talked about the proposal: “The measures announced today allow us to regulate the administration or distribution of virtual asset funds, in one way or another, so that the interests of investors are protected at the level of the administration of the funds and at the level of their distribution, or both”, he said.

Despite the publication of these proposals, it stills the possibility of not applying any regulation to the cryptoactive sector. Alder also commented: “It is possible that, due to the inherent characteristics of the technology or to the business models of the operators, it is concluded that the risks involved cannot be handled properly according to the standards that would be expected and that the protection of the investors cannot be guaranteed”.

Cryptoactives in Hong Kong is not directly linked to SFC regulations unless they are classified as securities or futures contracts. The statement details SFC considers that all administrators of licensed portfolios who intend to invest in virtual assets must meet certain requirements, even if they invest a lot or partially in virtual assets and regardless of whether these assets are equivalent to values.

Startups that manage funds, and that invest exclusively or partially in cryptoactives, will require a license or registry for the trading of securities, known as a regulated activity number 1. Additionally, SFC explains that these companies must comply with certain obligations when distributing the funds.

Other Control Attempts

In the Asian continent, some countries have tried to apply other regulations to the market of cryptoactives, which have been discussed during the last years, without any results so far. Last April, Taiwan announced it would take regulatory measures for cryptocurrencies on November, what has not happened yet.

The Japanese Government has manifested similar intentions. The Cryptobag Association of that country received a certification to regulate the market. At the beginning of this year, Japan’s Finance Minister, Taro Aso, announced that some regulations could be implemented to the cryptocurrency exchange houses, in order to increase their security standards.

Although Hong Kong is officially a special administrative region in China, both operate as a single country when dealing with cases about the management of cryptoactives. The reason is that there is a restriction on the commercialization of cryptocurrencies and Initial Currency Offers (ICO) in Mainland China, which is very different from what happens in Hong Kong.

Despite these attempts at control, the business sector increasingly accepts more cryptoactives and generates an increasing use of distributed accounting technology. In this way, Japan continues to be at the forefront of blockchain’s ecosystem.

 By María Rodríguez


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