Hong Kong is drawing up a shortlist of cryptocurrencies it will allow retailers to trade in on its exchanges.
The territory’s securities watchdog will propose a subset of acceptable tokens, its chief executive said on Wednesday, as it presses on with a new regulatory regime to make the city more friendly to crypto startups.
But Hong Kong’s Securities and Futures Commission (SFC) stressed the importance of investor protection, after what has been a turbulent year for cryptos, as it sought the public’s views on the safeguards it should put in place.
“Virtual assets have in the past year gone from peak to low [price] levels,” said Julia Leung, the commission’s chief executive officer.
“The good thing is that when the froth is taken out from the system as platforms and some tokens collapsed, it focuses investors and sellers’ minds on investor protection,” Leung said at a panel discussion at the Asian Financial Forum in Hong Kong.
Hong Kong’s move to allow retail trading in cryptocurrencies has come after months of turmoil in the sector, with the collapse of crypto exchange FTX the latest blow.
Bitcoin, the biggest cryptocurrency, has lost more than 70% of its value since hitting a record high in November 2021.
The SFC will start accepting applications for virtual asset service provider (VASP) licences in mid 2024, Leung said. The new crypto regime requires all trading platforms and exchanges to apply for a licence failing which would result in fines and jail terms.
Industry sources have said they expected the consultation on retail trading to start within the first quarter. Leung said the tokenisation of investment funds and bonds will also fall under the purview of the SFC.
- Reuters with additional editing by Sean O’Meara