Hong Kong will allow retail investors to trade mainstream cryptocurrencies under new rules

Hong Kong has announced that retail investors can trade cryptocurrencies under new rules for the digital asset industry, according to Bloomberg, as the Securities and Futures Commission (SFC) in Hong Kong detailed a consultation summary document for retail participation this afternoon. Individual investors are expected to be able to trade mainstream cryptocurrencies such as BTC and ETH with appropriate safeguards from June 1.

The SFC document shows comments on the requirement for non-securities based tokens to have a track record of at least 12 months. The regulatory arrangements for stablecoins are expected to be implemented in 2023/24. Stablecoins should not be included for retail trading until they are regulated in Hong Kong. Regarding proprietary trading, SFC agrees that liquidity on the trading platform is important to customers. Therefore, SFC allows liquidity provision activities by third party market makers. However, the current prohibition on proprietary trading is catch-all and effectively prohibits group companies of licensed virtual asset trading platforms from having any positions in virtual assets.

SFC has stated that platform operators should not offer incentives in connection with the purchase or sale of specific virtual assets. This principle forms the basis for the requirement that platform operators should not publish any advertisements relating to specific virtual assets. With respect to other common services in the virtual asset market (such as earnings, deposits and lending), the SFC does not permit licensed virtual asset trading platforms to offer these services.