Regulators released comprehensive guidance to banks, intermediaries, and insurers on virtual asset-related activities.

By Simon Hawkins and Adrian Fong

On 28 January 2022, Hong Kong’s principal financial services regulators issued much-anticipated guidance to banks, securities firms, and insurers looking to undertake activities related to virtual assets (VAs). In particular:

• The Hong Kong Monetary Authority (HKMA) issued a circular to banks on “Regulatory approaches to Authorized Institutions’ interface with Virtual Assets and Virtual Asset Service Providers” (HKMA Circular).
• The HKMA and the Securities and Futures Commission (SFC) issued a joint circular to banks and SFC-licensed intermediaries on “Intermediaries’ Virtual Asset-Related Activities” (Joint Circular).
• The Insurance Authority (IA) issued a circular to insurers on “Regulatory Approaches of the Insurance Authority in Relation to Virtual Assets and Virtual Asset Service Providers” (IA Circular).

This Client Alert analyses how, with the guidance, financial services industry participants can move towards engaging in VA proprietary investments and client services. The guidance will also impact existing crypto firms, as the regulators stressed that financial services intermediaries are required to use SFC-licensed VA trading platforms. For those not already licensed or seeking to be licensed, this stipulation may serve as the impetus to obtain a license in order to serve Hong Kong customers.