SFC Announcements on Regulatory Approach to Virtual Assets

Executive Summary

In a keynote speech at the Hong Kong Fintech Week on November 1, 2018, the Hong Kong Securities and Futures Commission (SFC) again asserted its cautious regulatory approach by announcing that it would step up its game in protecting investors of virtual assets.

According to the SFC, virtual asset is a digital representation of value and include digital tokens (such as digital currencies, utility tokens or security or asset-backed tokens) and other virtual commodities, crypto assets and assets of essentially the same nature. Where the virtual assets fall outside the definitions of “securities” and “futures contracts” under the Securities and Futures Ordinance (the “Non-SF Virtual Assets”), the activities relating to them may fall outside the ambit of the regulator’s jurisdiction, leaving investors unprotected.

A key take-away from the SFC's statement is their stated conceptual framework going forward in regulation their conceptual framework for licensing and regulating virtual asset trading platform, such as cryptocurrency exchanges. For example, the SFC plans on imposing standard terms and conditions on licensed corporations dealing with virtual assets as portfolio managers or fund distributors.

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Mayer Brown partner Sara S. M. Or and registered foreign lawyer Shirley T.W. Chan highlight areas of interest in this Legal Update.

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