3 June 2023
Hong Kong Brokers Seek SFC Authorization Before Digital Asset Trading Legislation
It has been stated by native reports that financial institutions in Hong Kong are beginning to provide services to everyday clients. The town's dealers and investment managers reportedly want guidance on upcoming licensing rules. To mirror the town's stated position on allowing Cryptocurrency commerce, Hong Kong's Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) was modified in December 2022.
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With this change, individual investors will be able to participate in the trading of virtual assets thanks to a new licensing structure for virtual asset service providers. Experienced traders and investors with minimum $1 million in verifiable holdings are now the only ones allowed to trade digital assets. When it comes to facilitating the trading of digital assets for institutional customers in Hong Kong, Victory Securities as well as Interactive Brokers were the pioneers.
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What is a Digital Asset?
A digital asset would be any item that survives exclusively in electronic format and that has a specific use right attached to it. Information without this legal protection cannot be regarded as an asset. To name just a few examples of digital assets, we can think of computers, laptops, portable media players, tablets, data storage devices, telecommunication devices, and any and all apparatuses which are currently in existence or which will be in existence once technology progresses to accommodate for the conception of fresh methodologies.
How are Digital Assets Traded?
Tokenized commercial real estate, asset-backed tokens, Cryptos, and NFTs are just some of the digital assets available today. Cryptocurrencies are the most well recognized kind of digital asset. The blockchain is used for the encryption of digital currencies like Bitcoin and Ethereum. Non-fungible tokens (NFTs) ensure that any token used to represent an asset can be traced back to a single owner via verification. NFTs are gaining popularity as a means to get rare or unusual items.
Tokenizing gold and oil and then trading assets on the blockchain is made possible by asset-backed tokens. Tokenization has the potential to address liquidity issues and open up these assets to a broader consumer as well as investment base. Similar to asset-backed tokens, commercial real estate may now be digitally tokenized. Tokenization of property investment describes this method. By improving market stability, boosting visibility in evidence of possession, as well as streamlining trades, this may open up possession options to a wider range of stakeholders.
SFC Authorization Before Digital Asset Trading Legislation
Deloitte Hong Kong's digital assets head Robert Lui believes that virtual currencies with substantial market capitalization and liquidity should be accessible to regular investors. Exchange-traded funds (ETFs) based on Bitcoin and Ethereum are now listed on the Hong Kong Stock Exchange, and brokers with offices in Hong Kong may provide services to investors in these ETFs. To facilitate transactions in virtual commodities, further SFC authorization is required. The original implementation date of March 1st, 2018 for the new license was postponed. The closing date was originally May 1, although it was pushed out to June 1 to give virtual asset service providers more time to be ready.
It follows the SFC's fresh appointment of Julia Leung as its new CEO. Leung's official tenure began on January 1st, and it will last for a full 3 years (till 2026). In the past, she has advocated for stricter rules around Cryptocurrency in her own country. One of Hong Kong's top bank officials has lately said that the government is investigating possible client safety laws.
After the Legislative Council modified the Anti-Money Laundering and Counter-Terrorist Financing Act last month, digital property network operators would fall underneath the SFC's purview as of June. A consultative document regarding how to open up trading in virtual assets to regular investors rather than only professionals and those with at least HK$8 million in financially successful assets is scheduled to be released by the SFC soon. In this way, regional financial service providers may connect with regular people interested in investing.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.