Hong Kong’s regulatory innovation and licensed firms pave the way for digital assets in Asia
Asia has the world’s largest pools of liquidity and is the epicentre of demand for digital assets, with Hong Kong at its heart. With its robust regulatory regime for digital assets, Hong Kong is also a key player in meeting investor appetite for this new asset class.
The Hong Kong Securities and Futures Commission’s (SFC) digital asset regulatory regime specifically focuses on investor protections and allows the institutional segment to safely and securely enter the space and trade innovative products like Bitcoin, Ethereum and Security Tokens (STOs). OSL Digital Securities Limited is the first and only firm to receive a license from the SFC to conduct types 1 (dealing in securities / brokerage) and 7 (automated trading systems / exchange) regulated activities for digital assets.
Under Hong Kong regulation, access to managed funds that specifically invest in digital assets is limited to accredited investors. Hong Kong regulations allow fund managers an allocation of up to 10 percent to digital assets, without requiring additional approval from the SFC.
OSL’s CEO, Wayne Trench (pictured) said: “The Hong Kong regulator is well respected globally and the territory’s proximity to capital from mainland China positions it well against regional peers to domicile funds. Hong Kong is one of the most important financial markets in the world. It’s a hub for both digital asset innovation and institutional investment. Most major banks, asset managers, funds, and advisors are active or at least represented here and there is a robust ecosystem of digital asset companies in the SAR.”
“Because of the SFC’s unique integrated framework, OSL clients receive all the protections and safeguards they are accustomed to in traditional finance. Managers can also take comfort in additional protections under the new regime that have been tailored for the new asset class.”
A reliable regulatory infrastructure is a keystone in the foundation of a successful funds market. In the digital asset space, funds offering access to this asset class can utilise the SFC’s framework to trade digital assets safely and securely by working with a licensed digital assets brokerage and exchange such as OSL. Trench continues: “Working with licensed players offers funds a credible and reliable counterparty to lower risk. Because we are fully regulatory compliant, our clients are afforded protections such as KYC/AML protocols, segregated bank accounts and insured custody.”
According to Trench, OSL’s security and compliance protocols meet and exceed the most rigorous financial services industry standards. The firm provides insured custody for digital assets, including comprehensive protection of customer assets for cold wallets and insurance for loss, damage, destruction, or theft of digital assets. The OSL Custody service is a wallet based solution that is protected in air-gapped HSM infrastructure and utilises state-of-the-art encryption, private key protection, and multi-layer authentication. It features round-the-clock surveillance and audited operation and control protocols.
“With regulation in Hong Kong, the playbook has been provided for institutional and professional investors to securely trade in the digital asset market. They can now invest safely, and with confidence in a sector that was mostly unregulated three short years ago.
“In many ways digital assets are speaking for themselves. The performance of the asset class has sparked a rapid increase in interest in OSL by hedge funds, treasuries, and family offices, who are looking to get exposure to Bitcoin, and other digital assets. Interest from independent wealth managers and private banks is growing too, as they seek safe, secure and regulated means for advisors to deliver these digital assets to their clients,” Trench added.
Wayne Trench oversees all of OSL’s activities, including trading and brokerage operations, product development and governance. He has more than 15 years of experience in digital assets, investment banking, trading and finance. Prior to joining OSL, Wayne held senior roles in major financial institutions, including as CEO of Octagon Strategy and Asia head of electronic trading coverage for Morgan Stanley. Wayne is also an entrepreneur, co-founding Aspir, a diversified mineral processing technology and equipment supplier in Australia, which was acquired by the Weir Group in 2013.
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