Hong Kong’s securities and exchange regulator struggles to clear off licensing hurdles, one year after launching a licensing scheme for crypto fund managers.
On Nov. 5, Reuters reported that the licenses introduced by Hong Kong’s SFC in October 2018 have apparently led to few approvals.
Crypto Funds Lacking Support and Experience
Hong Kong’s Diginex is reported to have won approval for a license in June. Its CEO Richard Byworth stated that the firm believed it is “vital to be regulated to build trust with our clients but also in the industry.”
Gaven Cheong — a partner law firm Simmons & Simmons, which advised Diginex on its SFC application, told Reuters:
Last year there was a lot of excitement but since then we haven’t seen much activity. Not many new managers in this area have the background, experience or support to mount such an undertaking, and this has meant that many applications never even get started.”
It is reported that the nature of the licensing pattern and the overall regulatory framework pushed some of the Hong Kong crypto funds offshore.
Industry Players Believe Regulation Not Obstructive
Some believe that it is not regulation but rather the time needed for funds in developing the required systems such as audit, custody, cybersecurity for obstruction.
Rocky Mui, a partner at Hong Kong law firm Clifford Chance, stated:
“My take is it is more an operational and infrastructure issue, than the regulator being obstructive.”
Blockchain investment firm Kinetic Capital partner Jehan Chu arguing that:
“Poor returns in 2018 scared large institutions away from allocating to crypto funds, causing those who survived to shelve their licensing plans. As institutional investors step into the market, crypto funds will dust off their licensing applications and take a fully regulated approach.”