The Hong Kong authorities are looking to regulate the cryptocurrency sector more strictly.
According to the latest news report by Nikkei Asian Review, the authorities are planning to bring crypto-related entities under the Securities and Futures Commission.
This will include traders, exchanges and other related companies working in the sector.
Mainland China’s Lenient Counterpart
Mainland China is extremely hostile towards digital currencies and has spent over a year cracking down on its cryptocurrency industry.
The Chinese authorities are supporting blockchain, but cryptocurrencies are of no interest to them.
Hong Kong is a more welcoming counterpart to mainland China which has now become a big market for initial coin offerings.
The only problem is concerns over money laundering and fraud, which have become characteristic of the ICO market.
The SFC guidelines suggest that investment funds will require a license if they hold over 10% of their managed assets in digital currencies. And they will only be able to sell their products to professional investors.
The authorities will also introduce a ‘regulatory sandbox’ as a voluntary scheme allowing exchanges to test cryptocurrency products and services before deciding to seek a license.
What’s the Timeline for New Regulations?
The proposed regulations will be set in motion in stages. It will only allow companies older than 12 months to issue tokens, given they fulfill the regulator’s requirements.
Exchanges were accused of misappropriating assets and market manipulation earlier this year when some investors claimed that they were unable to withdraw crypto and fiat from their accounts.
The regulator went on to send warning letters to seven local exchanges in February.
A month later, it halted the Black Cell Technology ICO and charged the company for engaging in unauthorized promotional activities.
Daiwa Institute of Research’s Daisuke Yasaku said that Hong Kong is going in the right direction with regulations, but the “cost of regulations will be high.”
Law firm manager Timothy Loh furthered the argument, saying:
“The requirements of the SFC initiative may prove too burdensome for some operators.”