Hong Kong’s Securities and Futures Commission (SFC) has issued laws for fund managers investing in “virtual assets.”
In an Oct. 4 announcement, the monetary market watchdog formalized a framework put out in November final 12 months that was aimed to control funds that allocate greater than 10 % of their portfolio in digital property.
The 37-page regulation, which is efficient instantly, defines digital property as “digital representations of value which may be in the form of digital tokens,” equivalent to digital currencies, utility tokens or safety or asset-backed tokens.
It additionally contains another digital commodities, crypto property or different property of basically the identical nature, no matter whether or not they fall below the definition of “securities” or “futures contracts” below the company’s present ordinance.
Other than that, the doc is pretty broad, as a lot of it follows present laws on fund-managers licensed by the SFC usually.
For occasion, fund managers investing in crypto property should have at the very least three million Hong Kong {dollars} ($382,000) of capital, much like the minimal requirement for the SFC’s sort 9 (asset administration) licensees. An impartial compliance officer must be appointed, and detailed compliance procedures have to be drafted.
Crypto fund managers should appoint a third-party custodian and the property of the fund and the fund supervisor have to be saved separate. Fiat forex should even be saved separate at a licensed Hong Kong monetary establishment or in a jurisdiction accepted by the SFC.
When selecting a custodian, the fund supervisor should set up that the establishment is able to coping with digital property and that it understands related ideas, equivalent to wallets. The SFC does permit for self-custody if sure necessities are met.
In phrases of buying and selling, the SFC requires fund managers to conduct intensive due diligence on crypto exchanges earlier than utilizing any digital asset buying and selling platform.
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