Hong Kong’s retail investors are now subject to new regulations for licensing of cryptocurrencies

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2nd June 2023 – (Hong Kong) Starting on 1st June, 2023, new rules governing cryptocurrency exchanges took effect in Hong Kong, allowing them to service retail customers if they secure and comply with licenses aimed at bolstering investor protection. The new regulatory framework requires virtual assets trading platforms operating in Hong Kong to adhere to a range of measures, including safe custody of assets, avoiding conflicts of interest, compliance with cybersecurity standards, and setting up exposure limits for retail investors. Exchanges must also only allow trading in highly liquid tokens. 

Crypto exchanges have a one-year transition period to obtain a license from the Securities and Futures Commission (SFC). As crypto trading is currently banned in China, operators must not accept retail traders from the mainland. Despite Beijing’s crackdown on crypto trading in 2021, China has backed Hong Kong’s push to become a virtual assets hub. More than 80 companies, including major crypto exchanges OKX and Huobi, had expressed interest in operating in Hong Kong even before the new laws kicked in.