Hong Kong SFC releases new rules affecting “virtual assets” fund managers

• New rules from the SFC come into effect immediately.
• The regulations require fund managers to have a capital of $3 million Hong Kong dollars to get involved in crypto.

The Hong Kong Securities and Futures Commission (SFC) has released new rules that will guide fund managers in their investment in virtual assets. The announcement on October 4, said that the SFC has formalized a framework that had been put in place in November 2018. The framework focused on the regulation of funds management firms that put over 10% of their portfolio in virtual assets.

The regulations have been put together in a 37-page document and are effective immediately. The rules have defined virtual assets as “digital representations of value which may be in the form of digital tokens.” These digital tokens are in the form of digital currencies, security or utility tokens and asset-backed tokens.

The list has expanded to include various virtual commodities and cryptoassets of a similar nature as “securities” or “futures contracts.” Moreover, the new rules require that fund managers interested in crypto assets investment have a capital of $ 3 million Hong Kong dollars. In addition, a third-party custodian be hired and  the firm’s traditional assets  kept separate.