According to a circular dated 4 October 2019, the Hong Kong Securities and Futures Commission (SFC) has issued official regulations for crypto-fund managers.
The 37-page document is entitled "Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets." In this document, SFC sets out conditions that apply to all companies that manage portfolios and invest in virtual assets.
Organizational and financial guidelines
Accordingly, asset managers in Hong Kong are expected to have liquid capital of at least 3 million Hong Kong dollars ($383,000) and a floating liquid capital. In addition, SFC recommends that the managers provide sufficient human and technical resources to fulfill their tasks. In addition, risk management and compliance guidelines, as well as guidelines to combat money laundering and the financing of terrorism should be issued.
To ensure the security of the fund assets at all times, SFC requires the appointment of a functionally independent custodian bank. In addition, the fund manager should ensure that the fund assets are kept separate from its own assets and the assets of other customers. An exception should only be possible for collective client accounts.
Hong Kong is a leader in handling digital currencies
Hong Kong is considered one of the most advanced jurisdictions for crypto-currencies and blockchain technology. Hong Kong is also one of the leading countries in terms of registered digital currency exchange transactions. SFC has already published guidelines for security token offerings in early 2019.