Hong Kong eases virtual asset rules, allows margin financing

Hong Kong has unveiled a series of measures to expand virtual asset product and service diversity in a bid to boost market vibrancy.

The city’s Securities and Futures Commission is allowing brokers to offer digital asset margin financing to their clients, enabling them with strong credit profiles and collateral to participate more actively in trading, thus enhancing the liquidity of Hong Kong’s market in a risk-controlled manner, according to a statement on Wednesday. 

Eligible collaterals are limited to bitcoin and ether, the two biggest cryptocurrencies for the timebeing, but may be expanded to other tokens in the future, the SFC said. 

The securities watchdog has also set out a high-level framework to guide trading platforms in developing perpetual contracts, or leveraged instruments, for professional investors, to deepen liquidity in the underlying spot market. 

To ensure investor protection, transparent product design, clear disclosures and robust operational controls for these leveraged products are outlined, the SFC said.

The regulator also allows affiliates of licensed platforms to act as market makers to further drive VA trading activity in the city, provided that strong safeguards are in place to mitigate conflicts of interest.