Hong Kong regulator updates policy for virtual asset activities

Hong Kong’s Securities and Futures Commission has updated its regulatory framework with two additional investor protection measures.

The updates are aimed at intermediaries that are interested in providing virtual asset-related products to investors. Specifically, the new investor protection measures are for virtual assets categorized as complex products. As an illustration of such a complex product, the regulatory body provides the example of an overseas virtual asset, non-derivative exchange-traded fund.

SFC updates its regulatory framework

The first update involves a selling restriction. The regulator’s statement said that virtual asset-related products which are considered complex products should only be offered to professional investors.

The second update tasks intermediaries with setting up a way to assess whether their clients have knowledge of investing in virtual assets, or virtual asset products. This “virtual asset-knowledge test” must be passed before the intermediary can proceed with a transaction. However, the intermediary can proceed to execute a transaction with clients who lack the knowledge specified in the test, only if they offer sufficient training to the client. Institutional professional investors and qualified corporate professional investors are exempt from this test.

“The SFC and the HKMA have reviewed their existing policy provided for intermediaries which wish to engage in virtual asset-related activities. The policy is updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to and from intermediaries with appropriate safeguards,” the announcement said.

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