Recommendation: Hong Kong’s Crypto Industry to Self-Regulate

The Hong Kong Securities & Futures Professionals Association (HKSFPA) has suggested that crypto firms in the city establish a self-regulatory committee to monitor compliance among themselves. According to the HKSFPA, the Hong Kong financial market industry is too focused on supervision, but lacks an organization to oversee its overall development. The association believes that Hong Kong needs to stay competitive in the global securities market and consolidate its status as an international financial center. The HKSFPA recommends that the Securities & Futures Commission (SFC), the city’s regulator, establish autonomous bodies that delegate licensing powers to industry players, while still retaining the power to supervise market conduct.

This recommendation is not new, as the HKSFPA made a similar suggestion in August last year. They aim for a balanced approach that prevents excessive supervision in the virtual assets industry in Hong Kong. It is important to note that self-regulation does not always come without risks. Lithuania, for example, is tightening its crypto regulations due to compliance failures and embezzlement. Hong Kong regulators have been more lenient towards virtual asset firms compared to their counterparts in other parts of the world. In fact, the SFC recently approved the listing of spot Bitcoin and Ether exchange-traded funds for issuers such as Harvest Fund Management, Bosera Asset Management, and China Asset Management (ChinaAMC). The regulator had also granted official virtual asset licenses to crypto exchanges Hashkey and OSL in the past.

In contrast, the US Securities and Exchange Commission (SEC) has not yet approved a spot Ether exchange-traded fund and has not offered specific licenses for crypto exchanges to register. The prospects for approvals in the US currently look grim. In light of these developments, the HKSFPA’s recommendation to establish a self-regulatory committee in Hong Kong could be seen as a proactive measure to ensure compliance and foster the growth of the virtual assets industry in the city. By delegating licensing powers to industry players, the regulatory burden on the SFC may also be reduced, allowing for a more streamlined approach to supervision.

The HKSFPA believes that a self-regulatory committee would contribute to maintaining Hong Kong’s competitiveness in the global securities market. By consolidating its status as an international financial center and promoting a balanced approach to supervision and development, Hong Kong can position itself as a favorable destination for virtual asset firms. While there are risks involved with self-regulation, the association aims to strike a balance that allows for the industry’s growth without compromising compliance standards. It will be up to the regulators and industry players to determine the effectiveness and feasibility of such a self-regulatory committee in Hong Kong’s crypto landscape.