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- The Hong Kong SFC has restructured its regulatory approach to virtual assets, introducing new updates to the virtual asset policy.
- The new policy restricts the sale of complex virtual asset products to retail investors.
- SFC insists intermediaries assess clients’ knowledge of the nature and risks of virtual assets.
According to the latest reports, the Hong Kong Securities and Futures Commission (SFC) has restructured its regulatory approach to virtual assets, introducing new updates to the virtual asset policy. Considering the rapid evolution of digital assets since the formulation of virtual asset (VA) regulation in 2018, the commission has reviewed and modified the existing policies regarding VA-related activities.
One of the major revisions is the distribution of “complex” virtual assets to professional investors. The SFC asserted that the potential risks of the virtual assets and their related activities are less likely to be understood by retail investors, pinpointing the agency’s decision to facilitate the sale of these assets only to professional investors.
Prominent Chinese crypto analyst Colin Wu shared an X post on his official account under the name Wu Blockchain, highlighting SFC’s phenomenal move. According to his tweet, SFC prioritizes customer protection by implementing newer customer protection measures on the distribution of VA-related products.
The Hong Kong SFC updated its virtual asset policy. The first is that virtual asset products that are considered complex products should only be sold to professional investors. The second is that for non-professional investors, intermediaries should first assess the relevant…— Wu Blockchain (@WuBlockchain) October 21, 2023
The novel client protection measures include selling restrictions and the VA knowledge test. Some virtual asset products like an overseas VA non-derivative ETF are considered “a complex product” and would be restricted to retail investors. However, some exceptional products, including the public futures-based VA ETF, are authorized by SFC for “offering to retail investors by the respective regulator in a designated jurisdiction”.
The commission’s enthusiasm for promoting the acquisition of knowledge and deciphering the uncanny crypto world among retail investors is evident in their new strategy of knowledge tests. SFC insists intermediaries “assess whether clients have knowledge of investing in virtual assets or VA-related products prior to effecting a transaction in VA-related products on their behalf”. If the clients lack adequate knowledge, the intermediaries are required to train them on the “nature and risks of virtual assets”.
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