Retail trade in crypto could kick off soon

Hong Kong's Securities and Futures Commission said retail investors could trade virtual assets on licensed platforms as early as the second half of this year, as guidelines for regulating virtual asset trading platforms take effect next Thursday.

While the SFC encourages operators to apply for a license, some neighbors including Singapore impose limits on crypto trading.

The framework seeks to woo crypto firms while safeguarding investors and it is a part of Hong Kong's effort to restore its status as a cutting-edge financial center. But any embrace of digital assets is controversial after a market rout in 2022 that sparked a spate of bankruptcies like the collapse of FTX.

"It's not a full open-arm stance as they want to maintain financial stability while opting for financial innovation," said Cici Lu, founder of Venn Link Partners, a blockchain adviser. "People shouldn't expect an open buffet for all while applying for a license in Hong Kong."

Individual investors can trade larger coins on exchanges licensed by the SFC under Hong Kong's new approach. Safeguards include knowledge tests, appropriate risk profiling and reasonable limits on exposure.

The coins should be included in at least two acceptable, investible indexes from independent providers - one with experience in the traditional financial sector.

The SFC said that licensed platforms should "comply with a range of robust investor protection measures covering onboarding, governance, disclosure and token due diligence and admission, before providing trading services to retail investors."

From June 1 unlicensed exchanges, including overseas platforms, actively marketing to Hong Kong investors will be breaking the law, said SFC interim head of intermediaries Keith Choy.