The Hong Kong Securities and Futures Commission has published new rules that enable digital currency exchanges to obtain operating licenses, Reuters reports. The move is reportedly part of a broader effort to improve standards, reduce fraud, and provide better regulation of the industry.
Hong Kong is host to some of the world’s largest digital currency exchanges, which have operated with little regulatory oversight in the past. SFC chief executive Ashley Alder attributed that hands-off approach to the fact that regulators have not defined most digital assets as securities. Apparently, however, the commission has now decided that it has oversight responsibility:
“After an in-depth examination of their unique technical and operational features, we concluded that some could be regulated by us.”
The rules will allow eligible exchanges to apply for a license. That eligibility is reportedly in line with the commission’s standards for traditional securities brokers. According to Reuters, the rules “stipulate that an exchange that wants to be licensed must provide services to professional investors only, have an insurance policy to protect clients in case assets are lost or stolen, and use an external market surveillance mechanism.”
Meanwhile, exchanges that do not trade digital assets that could be defined as securities can continue to operate without a license.