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Barely Any Hong Kong Crypto Funds Being Approved for Licenses

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One yr after launching a trailblazing licensing scheme for cryptocurrency fund managers, Hong Kong’s securities regulator has issued few and much between. 

According to a Reuters report on Nov. 5, the licenses launched by Hong Kong’s Securities and Futures Commission (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 help

While 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 — trade consultants have indicated that the limitations for market individuals stay excessive.

Hong Kong-based Diginex, operator of a cryptocurrency “fund of funds” is reported to have received approval for a license again in June, with CEO Richard Byworth stating the agency believes it “vital to be regulated to build trust with our clients but also in the industry.”

Gaven Cheong —  a accomplice regulation agency Simmons & Simmons, which suggested Diginex on its SFC utility, informed Reuters:

“Last year there was a lot of excitement but since then we haven’t seen much activity. Not many new managers in this area have the background, experience or support to mount such an undertaking, and this has meant that many applications never even get started.”

Unnamed sources informed Reuters the stringent nature of the licensing and broader regulatory framework had pushed some Hong Kong crypto funds offshore.

Regulator not obstructive, trade sources think about

Yet others have a special perspective, believing it’s not the regulation per se however slightly the time wanted for funds to develop the required techniques for custody, audit and cybersecurity. Rocky Mui, a accomplice at Hong Kong regulation agency Clifford Chance, said:

“My take is it is more an operational and infrastructure issue, than the regulator being obstructive.” 

As regular, 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 large institutions away from allocating to crypto funds, causing those who survived to shelve their licensing plans. As institutional investors step into the market, crypto funds will dust off their licensing applications and take a fully regulated approach.”

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 published this October, which features a requirement for fund managers to keep up liquid capital of a minimal of three million HK {dollars} ($383,000) — and its variable required liquid capital —  in addition to to nominate a functionally impartial custodian.




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