Hong Kong's New Crypto Regulations Leave Gray Area, Claims AAX Exchange

Hong Kong-based Bitcoin spot and derivatives exchange Atom Group has launched amid a tightening of the region's crypto-regulatory regime.

As the South China Morning Post reported on Nov. 7, the Atom Asset Exchange uses the Millenium Exchange matching engine developed by the London Stock Exchange and promises prospective clients lower trade latency and trade data transparency.

SFC brings security tokens and crypto futures under its remit.

AAX's launch comes just one day after Hong Kong's securities regulator, the Securities and Futures Commission, released new guidance for domestic cryptocurrency exchanges.

The watchdog has indicated that cryptocurrency trading related to security offering or futures contracts will henceforth come under its remit as a regulated activity - an announcement whose significance has been underscored by industry commentator Dovey Wan, a founding partner of blockchain investment firm Primitive Ventures.

In its guidance, the SFC stated that a license or authorization would be required for cryptocurrency futures products unless an exemption applies.

"Hong Kong hosts dozens of virtual asset trading platforms which pose serious investor protection concerns. A number of these may decide not to seek an SFC license under the new regulatory framework. This is a course of action which is open to them simply by ensuring that no virtual asset traded on their platforms is a 'security' or 'futures contract.'".

As SCMP notes, the SFC's chief executive Ashley Alder has stressed this week that certain crypto futures or derivatives contracts that offer high leverage pose high risks and could potentially be deemed illegal in the region.

"We welcome the SFC's latest guidance. AAX has always envisaged operating in regulated markets for cryptocurrencies that encourage innovation but that also provide investor protections. We see the SFC's announcement as an important step in that direction."

This March, the SFC released regulatory guidelines for Security Token Offerings, indicating that security tokens are likely to be classified as securities under Hong Kong's Securities and Futures Ordinance, and thus fall under existing securities laws.