SFC’s new regulatory roadmap for Hong Kong’s VA market – A-S-P-I-Re
Introduction
Today, the Securities and Futures Commission of Hong Kong (“SFC”) published a comprehensive regulatory roadmap, titled "A-S-P-I-Re" (“ASPIRe Roadmap”), to address the evolving challenges in the virtual asset (“VA”) market in Hong Kong, such as fragmented regulatory approaches, uneven liquidity distribution, and more.
ASPIRe Roadmap
The ASPIRe Roadmap is structured around 5 pillars (“Pillars”) under which, the SFC has formulated 12 initiatives (“Initiatives”):
Pillars |
Initiatives |
|---|---|
Access |
Establish Licensing Regimes for OTC trading and custody services |
| Attract global platforms, order flows and liquidity providers | |
Safeguards |
Explore adopting a dynamic approach to custody technologies and storage ratios |
| Enhance insurance and compensation frameworks | |
| Clarify investor onboarding and product categorisation | |
Products |
Explore regulatory framework for professional investor exclusive new token listings and VA derivative trading |
| Explore VA margin financing requirements aligned with securities market risk management safeguards | |
| Consider allowing staking and borrowing/lending services under clear custody and operational guidelines | |
Infrastructure |
Consider solutions for efficient regulatory reporting and deploy advanced surveillance tools to detect illicit activities |
| Strengthen local cross-agency collaboration and promote cross border cooperation with global regulators | |
Relationships |
Consider regulatory framework for financial influencers (Finfluencers) to address new investor engagement channels |
| Cultivate sustainable communication and talent network |
What it means to VA market participants
With the aim of harmonising regulatory standards both globally and in between traditional finance and VA, the ASPIRe Roadmap has demonstrated the SFC’s determination to reshape the current VA compliance regime. It is certainly very encouraging to see, for example, the SFC being willing to explore such things as customising regulatory standards according to the needs of particular VA service providers, VA products and VA investors.
The fact that the regulator will consider allowing VASPs to tailor their storage strategies and compensation strategies (currently a significant obstacle to setting up an exchange in Hong Kong particularly in relation to the custody requirements) would certainly open up the VATP regime to many more players.
Additionally, classifying VA products according to their activities rather than digital forms and enabling professional investors to participate exclusively in token listing and VA derivative trading, together with allowing for staking / borrowing activities (a brave foray into the previously taboo world of DeFi!) means a significantly enlarged scope of VA-related activities coming under a regulated framework in Hong Kong. If all these proposed changes do come to fruition, Hong Kong would certainly be THE leading crypto hub in the region, and possibly, globally.
With all these changes, of course, will inevitably come more rigorous oversight by the SFC. VA service providers should be prepared for the implementation of an enhanced supervision regime– such as the creation of a VA OTC trading and custody services regime, new requirements on VA investor onboarding, new VA margin financing requirements and “straight-through” reporting of digital asset information.
There is never a dull moment in the crypto space, and we are seeing a very positive signal from our regulators in terms of their thinking and attitude towards VA development in Hong Kong. We welcome these moves, and here at Charles Russell Speechlys, we are well-positioned to assist new players looking to establish a foothold in the market. Come and speak to our expert regulatory team today!
