Georgina Lee · · 4 min readWill retail investors be sidelined by Hong Kong’s proposed crypto rules?
Cryptocurrency exchanges in Hong Kong are taking steps to reorganize their operations by offering separate trading platforms for professional investors, as they heed calls from the securities regulator which is exploring a future licensing framework that would ultimately exclude retail traders.
Dave Chapman, executive director at Hong Kong-listed BC Group, said although the regulatory sandbox – a pilot scheme to test tokens and platforms – that the Securities and Futures Commission (SFC) launched in November 2018 was not mandatory, moves by the SFC to exclude retail investors was sensible because of the high-risk nature of virtual asset trading.
Hong Kong skyline / Photo credit: yuliufu / 123RF
Chapman said the proposed rules to regulate cryptocurrency trading services was all-encompassing as it would force out retail investors. “Targeting only professional investors make a lot of sense, [as] it is a high-risk investment and regulators do want to protect investors.”
In light of such development, the BC Group has launched a new trading platform for professional investors called AnxOne, targeting family offices, hedge funds, fund managers, and high-net-worth individuals, Chapman said.
As per Hong Kong regulations, a “professional investor” is someone who has a portfolio of at least HK$8 million (US$1 million), and AnxOne will apply the same standard in accrediting such investors.
Chapman said that ANX International, which he co-founded and has been serving retail investors since 2013 but is unrelated to BC Group, will continue to provide services in Hong Kong.
In the regulatory framework announced in November, the SFC said any licensing or authorization for operating an exchange will be predicated only on security tokens that have been identified to the SFC. Currently, eligible and interested operators can enter a regulatory “sandbox,” and based on the outcome, the SFC will then decide whether to issue a license or not.
Chapman also said that AnxOne will start trading these security tokens once a regulatory framework has been established in Hong Kong.
Unlike cryptocurrencies such as bitcoin or bitcoin cash, which are also called payment tokens, security tokens pay dividends, share profits, pay interests, or invest in other underlying assets that generate profits for their holders.
The company’s move comes after the South China Morning Post reported earlier that Coinsuper, another cryptocurrency exchange in Hong Kong, was also rejigging its business model by launching a separate platform targeting only professional investors.
Given these developments, will retail investors be sidelined under Hong Kong’s future regulatory regime and will they have to assume all the risk?
Photo credit: Andre Francois / Unsplash
Stay updated on the go with our mobile app.
Get latest insights with smoother, more personalized experience through TIA mobile app.
