The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have recently released new guidelines for intermediaries conducting virtual asset-related activities in Hong Kong. These guidelines aim to address the evolving market landscape and ensure the protection of investors in the virtual asset space.
Expanded Access to Virtual Asset Products
One notable change in the guidelines is the expanded access to virtual asset products. Previously, these products were restricted to “professional investors only.” However, the SFC and HKMA have revised their position and now allow a wider range of clients to have access to these products.
“This new announcement comes following updates in the market and concerns by local regulators after the JPEX incident,” says Hong Kong’s Commissioner of Customs and Excise, Louise Ho Pui-shan.
Local investors have been particularly concerned with the distribution and availability of virtual asset products. With institutional investors preparing for the rollout of spot ETFs, there was a need for a policy change to cater to the evolving market demands.
Restrictions and Requirements for Intermediaries
While the guidelines provide expanded access to virtual asset products, certain restrictions and requirements still apply to intermediaries offering these services.
Firstly, except for certain products like virtual asset futures contracts and other regulated markets, intermediaries can only offer virtual asset-related products to professional investors. This ensures that investors with the necessary knowledge and expertise are targeted.
“Intermediaries seeking to offer services to retail clients must assess whether their clients have sufficient knowledge for investing in certain products,” states the circular issued by the SFC and HKMA.
If clients do not possess the required knowledge, intermediaries can proceed only if they have provided adequate training on cryptocurrencies and affiliated products. Professional investors, on the other hand, are exempted from these training requirements.
Furthermore, intermediaries must observe all selling restrictions within the jurisdiction and refrain from offering unapproved products. It is also the responsibility of the company to ensure the suitability of the products offered to clients, considering factors such as financial status and risk tolerance.
Intermediaries must ensure that all parties involved fully comprehend the key details of the agreements, and risk disclosures must be provided, except for institutional clients.
