Hong Kong to only allow investing in highly liquid virtual assets

Hong Kong’s Securities and Futures Commission (SFC) Chair Julia Leung said the commission will allow retail investors to trade only highly liquid crypto assets, South China Morning Post reported.

Earlier on Jan. 9, Hong Kong’s Financial Secretary Paul Chan announced that from June 2023, the government will start issuing licenses to allow crypto exchanges to offer trading services to retail investors.

However, the newly appointed SFC Chair Julia Leung said that trading in crypto assets will be restricted to highly liquid products.

Leung noted that several crypto exchanges have over 2,000 assets listed, but, the SFC will not allow retail investors to trade in all of them. Leung said:

“We will set the criteria that would allow retail investors to only trade in major virtual assets.”

The SFC Chair added that only assets with deep liquidity will be on the trading list. It will be risky for retail investors to trade assets with low liquidity as they are more prone to market manipulation.

She said the regulator will work to ensure that approved exchanges have sufficient liquidity to cope with volatile market conditions.

Furthermore, the June 2023 regulatory guideline will require crypto exchanges to have risk management, internal controls, and proper custodian arrangements, in order to safeguard their customers’ assets.

Additionally, Leung said the SFC will work with the Hong Kong Stock Exchange to allow listed exchanges to disclose their climate risks.