• Licensed crypto exchanges in Hong Kong are allowed to service professionals only
  • Virtual assets are complex products that are likely not understood by retail investors, regulator says

A partnership between two digital asset brokerages enables a new route for professional investors in Hong Kong to dabble in cryptoassets.

OSL, a Securities and Futures Commission (SFC)-regulated digital asset platform, has agreed to provide Interactive Brokers a platform to offer virtual asset services to its professional clients, according to an announcement on Thursday. 

In late 2020, OSL became the first firm to receive permission from Hong Kong’s regulatory authority to provide a digital asset trading platform for institutions. It managed to get licensed after undergoing vetting requirements. Interactive Brokers’ partnership with the exchange highlights its weight in the market.

“Investors worldwide are rallying to digital asset markets, and the collaboration with OSL comes at a key moment in the development of the regulated digital asset ecosystem in Hong Kong,” David Friesland, head of Asia Pacific at Interactive Brokers, said in a statement.

In January this year, the Hong Kong Monetary Authority said only SFC-licensed financial institutions will be allowed to conduct the business. In a notice, the regulator said virtual assets should be considered complex products that are not likely to be understood by retail investors. And so, they must be restricted to professionals.

“Hong Kong has one of the world’s highest concentrations of institutional and professional investors, as well as a clear regulatory regime around digital assets,” Wayne Trench, OSL’s chief executive, said in a statement.

Hong Kong was a hotbed for some of today’s most well-known blockchain and crypto businesses including Crypto.com, BitMEX and Bitfinex. Popular stablecoin Tether too was launched there in 2014. But strict regulations, including the rule that restricts services to professional investors, led some companies to jump to other markets.

The SFC recently took aim at non-fungible tokens, warning that if investors “cannot fully understand them and bear the potential losses, they should not invest in NFTs.” China’s caveats on cryptocurrencies have also muddled Hong Kong’s role as a hub for fintech innovations. 

Many crypto exchanges have applied to Hong Kong’s licensing agreement, but OSL has been the only successful one so far.

  • Blockworks
    Reporter
    Shalini is a crypto reporter from Bangalore, India who covers developments in the market, regulation, market structure, and advice from institutional experts. Prior to Blockworks, she worked as a markets reporter at Insider and a correspondent at Reuters News. She holds some bitcoin and ether. Reach her at [email protected]