Hong Kong plans to ban retail investors from trading Bitcoin

Hong Kong authorities have tabled legislative proposals that would prohibit retail investors from trading Bitcoin and other cryptocurrencies, and would require exchanges to obtain licences, according to 8btc.

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The Financial Services and the Treasury Bureau published the proposal in November 2020 for consultation with industry and the public. After three months the document became a bill and could become law this year, the publication noted.

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The proposed law would require trading platforms, custodians, and providers of virtual-asset financing services to apply for a licence with the Securities and Futures Commission (SFC). One of the requirements would be to serve “only professional investors”.

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Industry insiders say that if the rules are adopted, companies and fintech professionals will lose interest in Hong Kong and relocate to countries with more favourable regulation.

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“The industry is still in an early stage of development, and regulators should provide greater space for innovation and entrepreneurship. Limiting trading to professional investors only could undermine Hong Kong’s competitiveness relative to other markets such as the United States, the United Kingdom, and, in particular, Singapore,” says Flex Yang, CEO of Babel Finance, a crypto-asset management firm.

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In explaining the requirements of the new rules, the Bureau cited the need to comply with FATF guidelines. However Malcolm Wright, chair of the advisory board of the Global Digital Finance association, which counts 300 members, including BitMEX, Huobi, OKCoin and Coinbase, noted:

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“Limiting cryptocurrency trading to professional investors is different from what we have seen in other jurisdictions, such as Singapore, the United Kingdom, and the United States.”

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All three countries are FATF members.

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The Bureau stated in the document that it “will empower the SFC to determine licensing requirements for virtual-asset service providers.” Regarding the restriction on retail investors’ trading, the regulator stressed:

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“The SFC will continue to monitor the market and reassess its position as it matures in the future.”

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Under Hong Kong rules, a professional investor may be a natural person or a legal entity with a portfolio of at least HK$8 million (about US$1.03 million).

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Earlier reports suggested that the proposed SFC limits for retail investors could threaten the operation of bitcoin ATMs in Hong Kong.

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