The Hong Kong Securities and Futures Commission (SFC) has announced its plans to revise and update its policies and requirements regarding the sale of virtual currencies. This move is in response to the evolving market conditions and growing inquiries from the industry. Under the updated guidelines, certain virtual currency products will only be accessible to professional investors. The commission has also stipulated that intermediaries in the cryptocurrency sector must evaluate their clients' knowledge of virtual assets before facilitating any transactions.
The SFC noted that despite the increasing popularity of virtual assets in some regions worldwide, the global regulatory landscape remains quite fragmented. It emphasized that the risks associated with investing in virtual assets, which were first identified by the SFC in 2018, are still relevant and need to be addressed.
The updated requirements categorize virtual assets as "complex products" according to the definitions provided by the Securities and Futures Commission. As such, they will be subject to the same regulatory guidance as other financial products classified as complex. The SFC cited cryptocurrency exchange-traded funds and products issued outside Hong Kong as examples of complex products.
This development comes on the heels of a scandal at the JPEX cryptocurrency exchange that has had a significant impact on many cryptocurrency users in Hong Kong. In September, the China Securities Regulatory Commission reported that it had received over 1,000 complaints related to JPEX, involving users who collectively claimed losses totaling millions of dollars. Subsequently, local authorities arrested six JPEX employees on charges of operating an unlicensed cryptocurrency exchange.
While it is not explicitly stated that the SFC's policy update is a direct response to the JPEX incident, the regulator announced in September its intention to increase efforts to educate cryptocurrency investors about the associated risks. Furthermore, in October, the Hong Kong Police Force and the Securities and Futures Commission established a collaborative working group with the aim of monitoring and investigating potential illegal activities within the digital assets space.
