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Hong Kong brokers, fund managers get ready for virtual-asset trading as SFC widens access to retail investors

  • Local brokers and fund managers have been asking about licensing requirements to trade virtual asset for retail clients, Deloitte says
  • GEM-listed Victory Securities and Interactive Brokers are the first to be allowed to provide the services – but only to professional investors for now

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People walk past an advertising poster for Bitcoins and cryptocurrencies in Hong Kong in September 2021. Photo: EPA-EFE
Enoch Yiu

Hong Kong’s financial services firms are wasting no time in preparing the groundwork to enable their retail clients to trade virtual assets in the coming months, following a key amendment to a local legislation, according to industry players.

“We have seen a lot of local brokers and fund managers seeking advice from us about the licensing requirements under the new regulatory regime,” said Robert Lui, digital asset leader at Deloitte Hong Kong. Authorities are likely to allow the retail investors to trade virtual assets that have a large market capitalisation and liquidity, he added.

The Legislative Council last month passed the amendment to the Anti-Money Laundering and Counter-Terrorist Financing Act, imposing a new licensing regime on virtual-asset service providers from June this year under the purview of the Securities and Futures Commission (SFC).

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The SFC is expected to issue a consultation paper on how to allow retail investors access to trading in virtual assets, versus the current restriction to professional investors, or those with at least HK$8 million (US$1.03 million) of bankable assets. This represents an opportunity for local financial services firms to widen their reach to retail investors.

The amendment has given momentum to Hong Kong’s vision of enhancing its regional hub status as demand for virtual assets exploders. The city is embracing cutting-edge financial technology despite misgivings following the collapse of FTX cryptocurrency exchange, saying virtual assets are here to stay as a conduit for financial innovations.

“Brokers who want to trade virtual assets for retail investors need to have responsible officers with virtual-asset knowledge,” Lui added. “They also need to show the SFC that they have internal controls, client money custody and insurance arrangements to safeguard client interests.”

Brokers currently do not require additional specific licences to service their clients in trading Hong Kong-listed exchange-traded fund futures based on bitcoin and ether. However, those planning to provide active trading of virtual assets – such as cryptocurrencies and their related futures products – will need additional approval from the SFC, Lui added.

GEM-listed Victory Securities and Interactive Brokers are the first two brokerage firms in the city that have already gained approvals from the SFC to trade virtual assets, but strictly only for professional clients.

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