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HONG KONG, H.K. – Cryptocurrency firms in Hong Kong are failing to meet the regulations set by the SFC.

Last year, the Securities and Futures Commission (SFC) of Hong Kong declared the regulations that investors who are interested in the crypto market have to meet. Since then, there have been a lot of crypto firms who filed to get the SFC clearance, but only one firm has been successful so far.

Based on some sources, only one firm, Diginex, a prominent name when it comes to crypto funds in the country, has passed the SFC’s regulatory requirement. It was based on what was published by the SFC in November 2018. According to reports, the regulation has been formalized last October 4, 2019.

The 2018 framework of the regulation is applicable to all the funds which operate in Hong Kong and is planning to invest 10% or more of its portfolio into digital assets. The 37-page guidance was published in October 2019. It contains a wide range of currently applicable regulations to the funds that Diginex is looking through. For example, the requirements needed in terms of capital reserves remain the same, but there’s a new regulation that points the eligibility of who will take on the custodian role for the digital assets.

According to some financial experts, the regulations from the SFC in Hong Kong are not stricter than expected, especially for a rising market. Nonetheless, Diginex is the only firm that met with the requirements of the SFC. On the other hand, other crypto firms are now shifting their focus into bringing their operations somewhere else to go around the regulations set by the SFC.

Some analysts also commented that several crypto firms are only exploiting their applications for SFC clearance as a marketing campaign instead of looking into getting the license. There are also crypto experts saying that the pessimistic view in the crypto market as of late is also a factor that keeps crypto firms from being committed to meeting the regulation.

Jehan Chu, a partner in Kinetic Capital, a famed venture capital dealing in digital assets, said in an interview that the poor returns and volatility in 2018 scared large firms into allocating funds. This, according to him, caused the firms which survived into shelving their plans of getting the license.

Despite the buzz around this issue, SFC officials refrained from giving a statement on the parts of the application process that caused a massive rejection of crypto firms, including the pending applications that are under scrutiny at the moment.

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