The
Hong
Kong
Securities
and
Futures
Commission
(SFC)
plans
to
create
a
consultative
panel
for
licensed
cryptocurrency
exchanges
in
the
city
next
year,
said
Eric
Yip,
the
SFC’s
Executive
Director,
Intermediaries.
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Speaking
at
Hong
Kong
Fintech
Week
on
Oct.
28,
Yip
said
the
panel
will
include
representatives
from
each
licensed
exchange
and
would
build
community
transparency
and
shared
responsibility
among
licensees.
“We
expect
the
panel
deliberation
will
result
in
a
comprehensive
virtual
assets
white
paper
that
outlines
the
development
roadmap
for
products
and
services,
as
well
as
potential
enhancement
in
compliance
and
risk
management,”
he
said.
The
move
will
be
part
of
the
city’s
effort
to
establish
a
comprehensive
framework
for
digital
assets,
which
includes
upcoming
legislation
for
OTC
trading
and
stablecoins.
Earlier
this
year,
Hong
Kong
brought
in
a
new
licensing
regime
for
virtual
asset
trading
platforms.
Three
are
currently
licensed
in
the
city
and
Yip
said
the
SFC
was
currently
processing
the
application
of
another
14,
11
of
which
have
pre-existing
businesses
in
Hong
Kong.
He
added
that
he
expected
more
licenses
to
be
granted
by
the
end
of
this
year.
But
Yip
also
cautioned
that
while
virtual
assets
were
at
the
forefront
of
the
agenda
for
financial
regulators
globally,
investors
still
need
to
be
protected
through
regulation
and
education.
In
the
first
half
of
this
year,
HK$1.5
billion
($193
million)
was
lost
to
investment
fraud
in
the
city,
while
fraud
and
scams
accounted
for
almost
half
of
reported
crimes,
according
to
a
police
statement.
It
did
not
publish
results
on
how
many
of
these
cases
involved
cryptocurrency
but
figures
from
2023
show
that
crypto-related
fraud
accounted
for
more
than
half
of
investment
fraud
losses.
“At
the
SFC,
we
firmly
believe
the
future
of
virtual
assets
lies
in
a
regulated
marketplace
that
balances
its
development
with
investor
protection.
We
do
not
need
to
reinvent
too
many
wheels,
as
our
experience
in
securities
regulation
lays
a
strong
foundation,”
Yip
said.
He
called
for
greater
cooperation
between
different
regulators
around
the
world
to
prevent
exchanges
from
playing
“regulatory
arbitrage”.
Yet
it
is
proving
to
be
a
challenge.
Some
of
the
biggest
exchanges
globally
have
dropped
out
of
the
Hong
Kong
licensing
application
process,
including
OKX,
HTX
and
a
local
Binance-backed
exchange.
The
small
amount
of
tokens
available
on
licensed
exchanges
and
the
lack
of
complex
financial
products
mean
retail
traders
are
continuing
to
use
overseas
exchanges
not
licensed
in
Hong
Kong.
Without
mentioning
this
issue
explicitly,
Yip
said
that
regulators
needed
to
stay
on
their
toes
to
keep
up.
“If
virtual
asset
liquidity
still
resides
in
unregulated
VATPs
after
all
our
efforts,
and
regulated
entities
cannot
operate
a
sustainable
business
model,
then
we
need
to
reflect
on
why
investors
didn’t
pick
our
state-of-the-art
regulatory
framework,”
he
said.
“In
short,
we
need
to
listen
to
the
market
and
balance
between
regulatory
perfection
and
market
development.”
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