One yr after launching a trailblazing licensing scheme for cryptocurrency fund managers, Hong Kong’s securities regulator has issued few and much between.
Based on a Reuters report on Nov. 5, the licenses launched by Hong Kong’s Securities and Futures Fee (SFC) in October 2018 have apparently led to few approvals, with reporters succeeding to independently determine only one licensee.
Crypto funds stated to lack expertise and assist
Whereas confirming the numbers stays troublesome in gentle of the SFC’s coverage of discretion — it declined Reuters’ request for remark and doesn’t publicly announce license approvals — business consultants have indicated that the limitations for market contributors stay excessive.
Hong Kong-based Diginex, operator of a cryptocurrency “fund of funds” is reported to have gained approval for a license again in June, with CEO Richard Byworth stating the agency believes it “very important to be regulated to construct belief with our purchasers but additionally within the business.”
Gaven Cheong — a accomplice legislation agency Simmons & Simmons, which suggested Diginex on its SFC utility, instructed Reuters:
“Final yr there was a variety of pleasure however since then we haven’t seen a lot exercise. Not many new managers on this space have the background, expertise or assist to mount such an endeavor, and this has meant that many functions by no means even get began.”
Unnamed sources instructed Reuters the stringent nature of the licensing and broader regulatory framework had pushed some Hong Kong crypto funds offshore.
Regulator not obstructive, business sources think about
But others have a distinct perspective, believing it’s not the regulation per se however slightly the time wanted for funds to develop the required methods for custody, audit and cybersecurity. Rocky Mui, a accomplice at Hong Kong legislation agency Clifford Probability, said:
“My take is it’s extra an operational and infrastructure situation, than the regulator being obstructive.”
As standard, excessive volatility and notably final yr’s “crypto winter” are cited as elements that spook candidates, with blockchain funding agency Kinetic Capital accomplice Jehan Chu arguing that:
“Poor returns in 2018 scared giant establishments away from allocating to crypto funds, inflicting those that survived to shelve their licensing plans. As institutional traders step into the market, crypto funds will mud off their licensing functions and take a totally regulated strategy.”
As reported, the SFC launched its fund licensing scheme along with steering on regulatory requirements again in October 2018, but didn’t formalize a statutory framework on the time.
A formalized doc was printed this October, which features a requirement for fund managers to keep up liquid capital of a minimal of three million HK ($383,000) — and its variable required liquid capital — in addition to to nominate a functionally unbiased custodian.
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