SFC Sets Out New Regulatory Approach For Virtual Assets

On 1 November, 2018, the Securities and Futures Commission of Hong Kong (SFC) issued a statement (the "Statement"), which sets out a new approach aiming to regulate virtual asset portfolio managers and distributors of virtual asset funds and a conceptual framework for the potential regulation of virtual asset trading platforms. In an accompanying circular (the "Circular"), the SFC provided detailed guidance and reminded firms that distribute funds investing in virtual assets of the registration and regulatory requirements.

The Statement

The SFC warns investors of the significant risks of virtual assets, some of which are inherent in the nature and characteristics of virtual assets while others arise from the operations of platforms or portfolio managers. In particular, the SFC focuses the regulatory attention on the following risks: (i) valuation, volatility and liquidity; (ii) accounting and auditing; (iii) cybersecurity and safe custody of assets; (iv)