Hong Kong's Securities and Futures Commission (SFC) wants to use a sandbox environment for cryptocurrency trading venues as part of a wider change in the regulatory approach to virtual assets.
Hong Kong investors are flocking to unlicensed virtual asset trading platforms, posing a significant risk, says the SFC.
To tackle this, the watchdog is planning to impose licensing conditions on firms which manage or intend to manage portfolios investing in virtual assets, irrespective of whether they meet the definition of "securities" or "futures contracts".
As part of this tightening of the rules, the SFC says it will explore whether virtual asset trading platforms are suitable for regulation in its sandbox. This would let the regulator observe the firms' operations and their compliance with proposed requirements. Then, the SFC would decide whether to grant a licence.
Ashley Alder, CEO, SFC, says: "We hope to encourage the responsible use of new technologies and also provide investors with more choices and better outcomes."
Editorial | what does this mean?