Hong Kong’s securities regulator, the Securities and Futures Commission (SFC), has recently announced an updated regulatory framework for digital asset fund managers in a document spanning 37 pages titled ‘Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets’.
Among the rules, regulations and guidance outlines for digital asset fund managers, the SFC included requirements that fund managers must follow to prevent illegal activities which may occur from digital asset transactions such as money laundering and terrorism funding.
As for the custody of digital assets, the SFC stated that fund managers must choose independent custodians for their clients’ assets in order to ensure the safety and security of investors’ assets.
Meanwhile, fund managers are required to perform due diligence on the security of custody solutions, such as assessing the quality of hardware and software.
According to the new rules, once a fund manager receives fiat currency from a client, the funds must be stored separately from any other clients’ funds. Moreover, bank accounts storing fiat currency should belong to a licensed financial institution based in Hong Kong.
Additionally, digital asset fund managers based in Hong Kong are required to ensure they have a minimum liquid capital of 3 million Hong Kong Dollars (approximately US$383,000), as well as its variable required liquid capital.
Hong Kong is recognized as a leading jurisdiction with a massive number of licensed cryptocurrency exchanges operating from the financial hub.
Previously in March, the SFC had published a guidance on security tokens in order to set out a regulatory framework for digital assets.
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