The Securities and Futures Commission (SFC) today sets out its vision for fostering a healthy and robust fintech ecosystem in Hong Kong by outlining several major areas of its initiatives to balance market development and investor protection.
In a speech delivered at the Fintech Week 2024, Dr Eric Yip, the SFC’s Executive Director of Intermediaries, detailed these initiatives to further develop and scale up Hong Kong’s virtual asset market (Note 1):
Swift licensing process for virtual asset trading platforms (VATPs)
The SFC is implementing a swift licence approval process for handling deemed-to-be-licensed VATP applicants, building upon its existing regulatory tools of risk-based on-site inspections alongside direct dialogue with the applicants’ senior management and controllers (Notes 2 and 3).
The SFC expects the first batch of formal licences to be granted to deemed-to-be-licensed VATP applicants by the end of this year.
Consultative panel for VATPs
To support licensed VATPs’ development of sustainable business models, the SFC is establishing an official consultative panel for all licensed VATPs with representatives from each licensee to ensure that their perspectives are taken into account in the SFC’s policymaking.
The consultative panel is expected to be launched in early 2025. Together with feedback from other stakeholders, the panel’s deliberation will form the foundation of the SFC’s forthcoming white paper on regulatory priorities for the virtual asset industry.
Further regulatory building blocks relating to virtual assets
As part of its commitment to enable the sustainable and responsible development of the virtual asset industry, the SFC is working with the HKSAR Government and other regulatory bodies to develop proposals for regulating the provision of virtual asset trading services, and the provision of virtual asset custody services (Note 4).
Tokenisation and Project Ensemble
The SFC continues to support tokenisation-related industry initiatives. The SFC is a core member of the Architecture Community of Hong Kong Monetary Authority’s Project Ensemble, co-leading tokenisation initiatives for the asset management industry. Project Ensemble plays a crucial role in establishing the necessary infrastructure for Hong Kong’s tokenisation ecosystem, ultimately setting industry standards for tokenised asset settlement (Note 5).
“The SFC will continue to adopt a pragmatic and proactive approach in building and advancing a holistic regulatory framework, to strike a balance between market development and investor protection,” said Dr Yip.
Dr Yip added that the SFC will continue to enhance its investor protection efforts through proactive monitoring systems and public alerts while stepping up its collaboration with other agencies.
Notes:
- A speech delivered by Dr Eric Yip at Hong Kong Fintech Week 2024 was posted on the SFC website today.
- Going forward, the SFC’s approach for VATP licence applications is as follows: (i) the SFC will conduct on-site inspections and applicants will have to agree with the SFC on rectification actions based on the result of the inspections; (ii) the SFC will formally grant licences to the applicants and allow them to conduct a restricted scope of business after successful implementation of their rectification plans; and (iii) the SFC will, jointly with such newly licensed platforms, engage an approved third party for an external review, the completion of which will allow the platforms to operate with the restricted scope uplifted.
- For more details, please refer to “SFC statement on the end of non-contravention period for virtual asset trading platforms” issued on 28 May 2024.
- The SFC has been actively reaching out to various stakeholders in Hong Kong’s virtual asset industry to understand more about their operations.
- For more details, please refer to “SFC welcomes launch of Project Ensemble Sandbox as key step in Hong Kong’s tokenisation development” issued on 28 August 2024.
