Hong Kong Securities and Futures Commission gives the green light: Virtual asset trading platforms can legally provide stake services.

With the maturation of the crypto assets market, the Securities and Futures Commission of Hong Kong (SFC) recently issued a new circular, formally indicating that licensed virtual asset trading platforms will be allowed to provide "stake services." This is not only a positive response to market demand but also further solidifies Hong Kong's positioning as a virtual asset hub. So, what regulations must trading platforms comply with? What risks should investors be aware of? The following article will help you break down the key points.

Hong Kong has moved from a complete ban to conditional opening.

In June 2023, the Securities and Futures Commission issued the "Guidelines for Virtual Asset Trading Platforms" which clearly prohibits platforms from using customers' assets to generate profits. However, in response to market demand for staking services, the Commission ultimately chose to adjust its stance and conditionally allow the provision of such services. This move not only caters to investor demand but also helps promote the security of blockchain technology and the overall development of the ecosystem.

What is "stake service"?

The "staking service" defined in the circular refers to the process of locking up customers' virtual assets and allowing the platform to participate in the blockchain verification procedures (such as the PoS mechanism) on behalf of users to earn rewards. In simple terms, it is helping you "lend out your Crypto Assets for mining" to earn returns.

Compliance conditions: Strict scrutiny, cannot be done recklessly.

Providing such services is not as simple as just starting; the platform must meet a series of strict regulations, including but not limited to:

Asset control: The trading platform must retain control over all staked assets and cannot entrust them to a third party for custody.

Risk prevention mechanism: Effective policies must be in place to prevent errors or fraudulent activities, and internal risk control processes should be established to manage potential conflicts of interest.

Transparent information: Must always provide the service details and operational status to the Securities and Futures Commission.

User Notice: Risks Cannot Be Ignored

Although staking sounds appealing, the Securities and Exchange Commission also reminds the platform to disclose all potential risks, including:

Lock-in Risk: Assets cannot be withdrawn at will during the stake period.

Technical risks: such as blockchain vulnerabilities, programming errors, or hacking attacks.

Legal Risks: The legality of staked assets remains uncertain in some jurisdictions.

The platform must clearly state information such as fees, staking conditions, minimum lock-up time, exit process, etc., on its website and application, so that users can participate with full knowledge.

Third-party participation must be chosen carefully.

If the platform chooses to outsource part of the staking operations to third-party service providers, it must undergo comprehensive due diligence, including an assessment of their technical infrastructure, security measures, and historical performance, and continuously monitor their operational risks.

Want to offer staking? You must first pass the Securities and Futures Commission.

Not only users who want to get on board, but the platform must also obtain written approval from the Securities and Futures Commission. After approval, the Securities and Futures Commission will add specific conditions for providing stake services to the license to ensure that all operations comply with regulations.

Is Hong Kong ready for the next stop of Crypto Assets finance?

This circular represents a key step in the regulation of virtual assets in Hong Kong, allowing legitimate trading platforms to provide users with more diverse earning options under compliance, and also demonstrating the regulatory agency's attitude of balancing innovation and investor protection. Whether virtual assets can be more deeply integrated into the mainstream financial market in the future is worth ongoing attention.

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