Hong Kong securities regulator wants stricter laws for digital currencies

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Hong Kong’s securities regulator wants more stringent regulations for the digital currency trading sector. The city has been weighing a raft of regulations that seek to limit exposure to retail clients, but the deputy head of the securities regulator believes Hong Kong should do more.

Liang Fengyi, deputy chief executive of the Securities and Futures Commission (SFC), said recently that the agency needs to do more to tackle digital currency fraud. The SFC has a duty to expand the scope of its regulations to better encompass the nascent industry, she stated.

The commission has been making moves to better protect investors from digital currency scammers, including through consistent warnings to the public on the risks of digital currency investment.

However, in Hong Kong, there still lacks definitive regulations for the sector. For one, digital currencies are not legally defined as securities or payment methods, Liang noted, according to a report by local paper ETNet. This means that they fall out of the jurisdiction of the SFC, making it that much harder for the commission to provide oversight for the industry.

Liang further believes it’s critical for the SFC to conduct investor education to prevent them from incurring huge losses while trading. In addition, the regulator must crack down on unlicensed digital currency transactions.

The agency “is continuously strengthening the supervision of over-the-counter derivatives, and will also launch a transaction data repository in the future,” she added.

The SFC’s measures have protected investors from using trading platforms that have yet to receive an operating license in the special administrative region. A month ago, Binance announced that it was shutting down derivatives trading in Hong Kong. This was after the SFC had issued a statement revealing that the embattled exchange had not been registered to conduct regulated activity in the city.

Not all the SFC’s measures have gone down well with investors. One of the most contentious proposals was in May when it suggested that digital currency exchanges should be limited to professional investors only. In the city, these are individuals with at least HK$8 million ($1 million). This proposal was met with outrage by the public as it would cut off over 93% of all digital currency owners in Hong Kong from accessing the exchanges.

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