SFC Consultation Conclusion on VASP Regime

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Authored by: Simon Deane and Chris Wong

The SFC released its conclusions on its consultation on the regulatory regime for virtual asset service providers (“VASPs”) on 23 May 2023. The month-long consultation process received a large number of submissions, reflecting the wide interest in the new regulatory regime and the opportunities it presents to the virtual asset industry.

Generally speaking, the SFC’s requirements for the new regulatory regime were supported by respondents. Certain amendments were made to the guidelines to account for more practical concerns raised in the consultation, as well as in relation to the criteria for onboarding retail investors and admission of virtual assets for trade by retail investors.

From the SFC’s responses, it would appear that the regulator is maintaining a flexible approach to regulation, making sure that VASPs are appropriately and strongly regulated, but retaining a light enough touch to be able to react flexibly to new developments. At certain points, the regulator noted that it will follow-up with further guidance for market participants (including FAQs) and conduct further reviews (particularly in relation to virtual asset derivatives). Such an approach is useful and warranted, given the rapidly developing and changing nature of the virtual asset industry.

The regulatory regime came into effect on 1 June 2023. As market players and potential applicants review the finalised guidelines and make plans to enter this new market, the date marks a big step forward in Hong Kong’s opening up to the virtual asset industry.

The consultation conclusions and finalised guidelines can be found here.

Key Contacts

Simon Deane

Consultant | Banking and Finance

Email or call +852 2825 9209