Hong Kong SFC Publishes Staking Guidance for Crypto Industry Stakeholders
Hong Kong's SFC mandates VATPs and VA Funds to implement measures that will mitigate potential risks to investors.
The Hong Kong Securities and Futures Commission (SFC) recently released a statement indicating that the region’s financial watchdog has taken a significant step towards regulating the cryptocurrency industry.
Hong Kong’s SFC published guidance on staking services for licensed virtual asset trading platforms (VATPs) and authorized virtual asset funds (VA Funds).
The body recognizes the benefits of staking, which can strengthen blockchain security and provide investors with opportunities to earn returns on their virtual assets in a regulated environment. Henceforth, the body will allow VATPs to expand their services.
Thus, the new guideline aligns with Hong Kong’s ‘ASPIRe’ strategy, which seeks to promote the growth and development of the City’s virtual asset ecosystem.
Hong Kong Regulatory Approach to Staking
According to the circular issued to VATPs, one of the guidelines mandates the platforms to implement robust measures to prevent errors associated with staking services, ensure the safekeeping of staked client virtual assets, and provide clear and transparent disclosure of risks to which such assets may have to reduce potential risks to investors.
The SFC also updated its circular on authorized VA Funds, facilitating their participation in staking activities. However, these funds may stake virtual asset holdings exclusively through licensed VATPs and authorized institutions and only up to a specific limit to manage liquidity risks.
Concerning the recent update, the SFC’s Chief Executive Officer, Ms. Julia Leung, said, “Broadening the suite of regulated services and products is crucial to sustaining the healthy advancement of Hong Kong’s virtual asset ecosystem.”
“But the broadening must be done in a regulated environment where the safety of client virtual assets continues to be front and center of the compliance framework for offering such services.”
Hong Kong’s Crypto Regulatory Landscape
Despite its willingness to explore crypto, Hong Kong has always taken a cautious approach to regulation.
Last year, the region’s top regulator flagged “Floki” and “TokenFi” staking programs, adding them to a “Suspicious Investment Products Alert List” after the program providers failed to register them before making them available to investors in Hong Kong.
However, this stance doesn’t imply that Hong Kong inherently oppose the crypto industry. In February, the government formally acknowledged Bitcoin and Ethereum as eligible assets for investment immigration purposes.
