Hong Kong proposes milder crypto regulations that would let retail investors trade certain “large-cap tokens” on licensed exchanges, emerging as one of the new hubs for the virtual asset industry

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On Monday, Hong Kong introduced a?regulation proposal that would allow retail investors trade certain “large-cap tokens” on licensed exchanges. National regulator Securities and Futures Commission (SFC) is now conducting?a consultation on the proposed requirements for operators of virtual asset trading platforms.

Although trading in the city-state would face certain limitations, the proposed policy still strongly contrasts mainland China’s approach where crypto-related transactions are outright banned. Besides, the region might emerge as a new crypto hub in times when major crypto markets like the US are facing ongoing regulatory crackdowns.

Hong Kong regulator did not specify which large tokens would be allowed for trading, although reportedly they would likely be Bitcoin and Ether, the biggest digital assets by market value. The?requirements for virtual asset trading platforms will be comparable to those existing for licensed securities brokers and automated trading venues.

The proposal would require all centralized virtual currency exchanges operating in the city or marketing services to Hong Kong investors must obtain licenses from the securities and futures authority. More requirements will be introduced regarding assets custody, KYC and AML procedures, conflicts of interest, cybersecurity, accounting and auditing, risk management, counter-financing of terrorism and prevention of market misconduct.

Besides, SFC is considering robust investor protection measures, which include ensuring suitability in onboarding clients and token admission.

The announcement suggests operators of virtual asset trading platforms which plan to apply for a licence should begin to review and revise their systems and controls to prepare for the new regime. Otherwise, they would need to prepare for an orderly closure of their business in Hong Kong.

One of the largest financial institutions in Southeast Asia, DBS Bank has already announced its plans?to expand crypto trading services to Hong Kong as soon as it gets the necessary license.