SFC Licensing Puts Hong Kong and OSL in Pole Position for Institutional Digital Asset Growth
By OSL CEO Wayne Trench
In the space of a few short weeks, the game has changed in Hong Kong, Asia and across the broader digital asset landscape.
Yesterday, OSL became the first digital asset platform to receive Securities and Futures Commission (SFC) licenses for Type 1 (dealing in securities) and Type 7 (automated trading systems) regulated activities. OSL now enjoys a significant first-mover advantage and is well-positioned to continue to capture growing global institutional inflows into digital assets such as Bitcoin and security tokens (STOs).
On 3 November, SFC CEO Ashley Alder drew a line in the sand when he stated that ALL Hong Kong-based digital asset operators - along with offshore operators actively marketing to Hong Kong customers - will soon need to be licensed. It was also made clear that all licensees will be held to similar standards of conduct and compliance requirements. Whilst some view this regulatory evolution as going against the libertarian roots of digital assets, the team at OSL has long held the view that regulation is inevitable, necessary and desirable for fostering widespread acceptance and global adoption of the asset class.
The consequences of the recent announcements are both material and wide reaching, as many existing unregulated platforms will be forced to comply or exit under the SFC’s new rules. These changes will result in existing sector revenues needing to find a regulated home.
Hong Kong’s new requirements provide an unprecedented level of investor protections, while still allowing for the creation of new and innovative products for the growing institutional and professional client segment.
Perhaps most notably, the SFC’s licensing regime allows STOs to be traded on Hong Kong-licensed digital asset platforms -- a unique feature among the recent spate of new digital asset-specific licensing rules implemented in the major financial centers.
The Hong Kong framework also requires license holders to provide insured custody, client asset segregation (for fiat and digital assets), adhere to strict AML/KYC requirements and conduct market surveillance. In addition, the SFC mandates minimum liquid capital levels along with other compliance requirements expected from traditional licensed and regulated firms.
The framework appears to be setting a global standard for others to follow, particularly global top-tier jurisdictions looking to deliver the safeguards, controls and oversight required for institutional investors to confidently and safely participate in digital assets like Bitcoin. We anticipated this years ago - and it is why licensing is a core part of our business strategy.
With Bitcoin reaching a new all-time high in November, and institutional participation ratcheting higher almost on a daily basis, Hong Kong and the SFC have again proven to be global industry leaders in the space. With the license granted, OSL is strongly positioned, with a positive outlook for the future in Hong Kong, Asia and beyond.
OSL is Asia’s most comprehensive digital asset platform providing brokerage, exchange, software-as-a-service and insured custody solutions to professional investors.
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