The SFC i.e. Securities and Futures Commission of Hong Kong have officially introduced regulations for Cryptocurrency Fund Managers.
Effective immediately, the SFC has formed a 37-page framework which aims to regulate the funds that contribute over 10% to their virtual assets portfolio.
The document titled “Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets”, defines virtual assets as digital representations of value which may be in the form of digital tokens”. It includes digital currencies, utility, and security or asset-backed tokens.
Any other virtual commodities will be categorized as “securities” and “futures contracts” if they are of the same nature and are also covered in the document.
The document requires the fund managers of virtual assets in Hong Kong to maintain a minimum liquid capital of $383,000 or 3 million Hong Kong Dollars and have its variable liquid capital.
It also states that the fund managers should have optimum technical and human resources to ensure tasks are performed properly. It should also adopt measures that are compliant with the policies and risk management like Combating Financing of Terrorism (CFT) and Anti Money Laundering (AML) protocols.
The SFC also requires that the fund managers assign a third party custodian and virtual fund manager to keep personal and client’s assets separate. Furthermore, SFC wants the fiat currency to also be segregated at a jurisdiction authorized by SFC or a licensed Financial Institute in Hong Kong.
The fund managers of Virtual Assets will also be responsible for the evaluation of diverse custodial arrangements like software and hardware infrastructure, security control over key generation, management & transaction, storage, and blockchain fork handling process.
It is also reported in a recent U.K. study that the country’s financial regulatory body, FCA (Financial Conduct Authority) probed around 87 crypto companies as a part of its initial scrutiny. As compared to the 2018 probe that saw FCA investigating 50 firms, the figure is 74% higher.