Unleashing the Potential of Web3 and Virtual Assets: Recent Updates from Hong Kong Securities and Futures Commission

According to reports, at the 2023 Hong Kong Web3 Carnival, Keith Choy, interim head of the Intermediary Department of the Hong Kong Securities and Futures Commission, stated in his keynote speech that he would unleash the potential of Web3 and virtual assets. DeFi has concerns about financial stability, data, and investor protection, mainly due to concerns about leverage and borrowing. Starting from June this year, whether the virtual asset trading platform (VATP) provides securities tokens or non securities tokens, we will have to issue licenses to protect investors. According to our existing system for VATP, we still need to conduct relevant consultations, make some adjustments and supplements, and suggest setting additional admission rules for retail investors. We call on all relevant parties in the market to actively participate in discussions and engage in constructive dialogue with us.

Interim Director of the Intermediary Department of the Hong Kong Securities Regulatory Commission: Will unleash the potential of Web3 and virtual assets

At the 2023 Hong Kong Web3 Carnival, Keith Choy, interim head of the Intermediary Department of the Hong Kong Securities and Futures Commission, emphasized the immense potential of Web3 and virtual assets. In his keynote speech, he outlined the Commission’s plans to strengthen investor protection and ensure financial stability with regards to Decentralized Finance (DeFi). However, there are concerns regarding the use of leverage and borrowing, which can affect both data security and financial stability. The Hong Kong Securities and Futures Commission intends to address these concerns by imposing regulations on virtual asset trading platforms (VATP).

The Need for Licensing

Effective June of this year, VATPs dealing in securities tokens or non-securities tokens will require licenses to ensure investor protection. However, this new regulation requires consultation, adjustment, and supplementing existing guidelines according to the existing VATP system. The Commission suggests implementing additional admission rules for retail investors to safeguard their financial interests. The Commission invites all relevant parties to participate actively in discussions and engage in constructive dialogue to ensure the overall success of the regulation.

Ensuring Financial Stability

DeFi is a decentralized finance system that eliminates intermediaries in transactions underpinned by blockchain technology. With DeFi, anyone can access financial services without a central authority, such as banks. However, lack of intermediation in DeFi has implications for financial stability. As a result, the Hong Kong Securities and Futures Commission aims to ensure that payments, clearing, and settlement of virtual assets are conducted in a safe and practically sound manner.

Data Security Concerns

Data security is a significant concern in the virtual asset market. The Commission plans to monitor the management of customer information, the use of clearing and settlement systems, and the risk management of virtual asset trading platforms. Additionally, they will implement consumer protection mechanisms to address security concerns such as hacking and ransomware attacks. This exhaustive approach will ensure the security of the entire system and discourage any form of illegal behavior.

Investor Protection

The Commission will focus on supervising the financial services industry’s regulatory environment to protect investors’ interests. This approach includes identifying and preventing the exploitation of vulnerable investors and ensuring that they receive sufficient information to make informed decisions. The Commission will monitor the performance of service providers and neutral third parties such as auditors to prevent possible misconduct, which will reinforce investors’ trust in the industry.

Conclusion

The Hong Kong Securities and Futures Commission’s decisive initiative to regulate virtual assets trading has far-reaching implications. It will ensure the overall financial stability of the sector and prevent the exploitation of investors. The Commission will work hard to guarantee that virtual asset trading is carried out safely and securely, and stakeholders must contribute their opinions to ensure that the policies are productive and constructive.

FAQs

1. **What is the Hong Kong Securities and Futures Commission’s new regulation?** The new regulation aims to establish licensing requirements for virtual asset trading platforms to ensure investor protection from securities tokens or non-securities tokens.
2. **What is DeFi?** DeFi is a decentralized finance system that eliminates intermediaries in transactions underpinned by blockchain technology.
3. **What is the Hong Kong Securities and Futures Commission’s data security plan?** The plan involves monitoring virtual asset trading platforms’ management of customer data, using clearing and settlement systems, and implementing consumer protection mechanisms against cybersecurity threats.