Hong Kong Securities and Futures Commission (SFC) issued a statement today stating regulatory standards that will determine the course of portfolio managers of virtual assets and fund distributors, according to an announcement on its
website.
According to the CCN report, the regulatory body proposed a framework in a research paper published in October 2018.
The imperative of implementing regulations for the digital currency sector
Reforms are inevitable in the wake of the inherent influence of virtual asset ownership by funds and awareness among investors about the existence of unlicensed trading platforms in Hong Kong.
In view of this trend, SFC is also exploring conceptual frameworks for the development of regulations that will be binding on virtual asset trading platforms. Securities organizations agree on investor protection risks posed by default assets. He said in the statement issued by the Commission:
"Although default assets have not posed a material risk to financial stability, there is a broad consensus among securities regulators that they pose significant risks to investor protection. The regulatory response to these risks varies in different jurisdictions, depending on the regulatory authority, the volume of activities, their impact on the interests of the investor, and whether the default assets are financial products suitable for regulation "
There was a difference in regulatory response to these risks across different jurisdictions. Under the current Hong Kong regulatory framework, the legal definition of "securities" or "futures" places a temporary mark on SFC's ability to exercise its control over all default assets.
Thus, investors who have resorted to digital currency trading through unregulated trading platforms are at risk.
Risks associated with digital organization
The default assets in general lack intrinsic value, making them very volatile. As opposed to cash known as accepted valuation principles. In general, default asset prices are driven by supply and demand, and in most cases by fear of loss (FOMO) and fear, uncertainty and uncertainty (FUD), which increase volatility. The absence of acceptable criteria for obtaining evidence of the existence and ownership of virtual assets makes it relatively impossible to verify the reasonableness of assessments.
The concealment of these assets is also a vehicle for unscrupulous activities such as money-laundering, financing of terrorism and fraud.
New organizational reforms
The new regulatory position of SFC places a large part of all default assets under the definition of "securities" or "futures".
In addition to issuing the latest framework, companies that manage funds that invest only in non-securities or futures contracts will be required to obtain a license to handle securities as well as distribute them in Hong Kong. The scope of supervision also covers licensed companies or may require a portfolio management license in securities, futures or both.