Regulation
Hong Kong trade body calls for crypto self-regulation amid global scrutiny
The Hong Kong Securities and Futures Professionals Association (HKSFPA) has called for the establishment of independent self-regulatory organizations (SROs) dedicated to monitoring the digital assets sector.
THE initiative comes in response to rapid growth and the increasing complexity of the industry. It aims to improve the regulatory landscape to support innovation and security within the booming field.
As part of its proposal, the HKSFPA suggests that the Securities & Futures Commission (SFC), Hong Kong’s main financial regulator, continue to supervise market conduct. However, it recommends that licensing power be distributed among industry players, including those in securities, futures, asset management and virtual assets.
SRO
Recognizing the unique challenges posed by cryptocurrencies, blockchain technology, and other digital assets, the proposed SRO would focus on developing tailored regulations that address the specifics of digital currency exchanges, initial coin offerings ( ICO) and associated financial services.
Chen Zhihua, Chairman of the HKSFPA, highlighted the need for Hong Kong to adopt a forward-thinking approach to maintain its competitiveness as a global financial hub. He added that the dynamic nature of digital assets requires a regulator that can quickly adapt to technological advancements and market changes.
Additionally, an independent SRO for digital assets would allow the crypto industry to implement effective oversight while promoting ethical practices and protecting investors.
The strategy outlined by the HKSFPA aims to balance the need for regulatory oversight with the imperative to promote industry growth. It also seeks to avoid extremely strict supervisions that could stifle innovation, drawing lessons from other markets like Lithuania, which is expected to strengthen its crypto regulations from 2025 after facing challenges such as compliance violations and misappropriation of funds.
Responsibilities
The proposed body would establish and enforce standards, and play a central role in educating the industry and the public about the benefits and risks associated with virtual assets. He would work closely with technology experts and financial analysts to ensure that regulations keep pace with rapidly evolving digital asset technologies and market conditions.
Additionally, the HKSFPA suggests that this specialized SRO would address issues such as cybersecurity threats, fraud detection, and transparency of transactions involving virtual assets.
It would also coordinate with international regulators to align with global standards, thereby strengthening Hong Kong’s stature as a safe and attractive destination for investors and digital asset businesses.
By proposing a dedicated SRO, the HKSFPA aims to create a structured yet flexible regulatory environment that not only meets the current needs of the virtual assets market, but also anticipates future developments.
Hong Kong’s approach contrasts with the stricter regulatory frameworks emerging globally, signaling the city’s ambition to cement its status as a major international financial center. As the global cryptocurrency regulatory landscape evolves, Hong Kong’s move toward self-regulation could serve as a test case for the effectiveness of such frameworks in promoting responsible but vibrant market environments.