Hong Kong Regulator Introduces Guidelines for Cryptocurrency Fund Managers
The Securities and Futures Commission (SFC), which is the securities regulator of Hong Kong, has published rules for crypto fund managers. The circular on regulations was published by the SFC on its web page on October 4.
The 37-page document titled “Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets,” stated that the SFC gave rules and regulations for enterprises administering portfolios that buy and sell digital assets.
As per the document, virtual asset fund managers in Hong Kong should always retain liquid capital of a minimum of HK$3 million (~383,000).
The SFC suggested administrators to have adequate human and technical reserves for the right execution of tasks and also to embrace risk administration and compliance guidelines and also policies for Anti-Money Laundering and fighting terrorism funding.
To guarantee the safety of fund assets, the SFC also necessitates crypto fund administrators to designate distinct custodian. The regulator stressed that a digital asset fund manager should guarantee its fund assets are isolated from its own resources, and also the assets of other customers, but for fund assets are stored in an omnibus customer account.
If an administrator receives fiat currency on account of the fund, more than one segregated bank accounts should be established for securing clients’ funds, the SFC stated. Bank accounts should be setup and retained with an approved financial organization in Hong Kong or a bank in an area approved by the SFC.
In addition, the cryptocurrency fund manager should validate the characteristics of disparate custodial arrangement, including hardware and software framework, security consoles over key creation, administration, repository and transaction, and also the procedure of managing blockchain forks.
Hong Kong has turned itself as one of the most advanced jurisdictions for cryptos and blockchain, as the country leads in several registered cryptocurrency exchanges. Earlier in 2019, the SFC gave suggestions on security token offerings, aiming to draw more lucidity about the constitutional and administrative needs for the market.