Hong Kong explores new token listings, derivatives and staking as global competition increases

Hong Kong’s top financial regulator has released a new roadmap to further develop its cryptocurrency industry with proper regulation as the region continues its drive to become a crypto hub.

The Securities and Futures Commission announced 12 initiatives today to “enhance the security, innovation and growth” of the crypto market through regulatory clarity. “The initiatives will streamline access for global liquidity, enable adaptive compliance and product frameworks focusing on security, and drive infrastructure upgrades for traditional finance to tap into blockchain efficiency,” the SFC said.

The SFC plans to establish licensing regimes for over-the-counter crypto trading and custodian services. “OTC desks, favored by institutions for conducting discreet large trades, operate with minimal transparency, thus heightening risks of market abuse,” the SFC wrote in the roadmap.

Exploring new token listings, staking

Currently, regulations for new token listings are quite restrictive in Hong Kong, with bitcoin and ether legally available for retail trading via licensed platforms. “New tokens, margin trading, derivatives, staking, and borrowing/lending are not permitted,” the SFC said. 

However, the regulator noted that it plans to potentially expand its regulatory framework to facilitate the listing of new tokens exclusively for professional investors. It will also review existing safeguards for retail offerings.

The SFC will also look into crypto derivative trading for professional investors. “By studying the introduction of the trading of derivatives, the SFC seeks to facilitate efficient risk transfer,” the regulator said.

Staking is another area the SFC plans to study. The regulator said that it will explore the establishment of requirements governing the custody of client assets and mitigation of slashing and liquidity risks arising from staking. “Through this initiative, investors can participate in a core function of virtual assets while benefitting from yield-generation, which are unparalleled in the TradFi markets,” the SFC added.

The regulator also intends to bring in more global liquidity providers, aiming to reduce barriers for these providers to connect with local crypto trading platforms, according to the roadmap.