Hong Kong’s financial regulators, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), have recently issued new guidelines for intermediaries engaged in virtual asset-related activities. These guidelines have been introduced in response to ongoing market developments and aim to address concerns regarding the distribution of digital asset products, provision of asset dealing services, and guidance in asset management and advisory services.
Expanding Access to Virtual Asset Products
The SFC and HKMA have made a slight policy shift by allowing a wider range of clients to access virtual asset products, moving away from exclusively serving “professional investors only.” This change comes after careful consideration of market updates and the JPEX incident, which raised concerns among local regulators. The Commissioner of Customs and Excise, Louise Ho Pui-shan, called for increased scrutiny following the JPEX saga, highlighting the need for a policy change to accommodate local investors as institutional investors prepare for the rollout of spot ETFs.
Restrictions and Requirements for Intermediaries
While the guidelines provide more accessibility to virtual asset products, certain restrictions and requirements remain in place for intermediaries. For most virtual asset-related products, including asset futures contracts and regulated markets, they may only be offered to professional investors. Intermediaries seeking to offer services to retail clients must assess their clients’ knowledge and experience in investing in these products. If clients lack sufficient knowledge, intermediaries can proceed with providing services only after adequately training the clients on the nature of cryptocurrencies and affiliated products.
The guidelines also emphasize that intermediaries must comply with all selling restrictions within the jurisdiction and refrain from offering unapproved products. It is the responsibility of companies to ensure the suitability of products through solicitations and recommendations, considering the best interests of the clients and factors such as their financial status and risk tolerance. In addition, intermediaries must ensure that all parties involved fully understand the key details of agreements, and except for institutional clients, relevant risk disclosures must be published.
