SFC

HashKey launches wealth management service, citing ‘significant’ demand

Hong Kong’s HashKey recently received a number of licenses from local regulators, allowing it to expand its range of products and services.

Hong Kong-based digital asset firm HashKey Group has launched a new wealth management platform geared toward professional and institutional investors.

In an April 14 announcement, HashKey cited “significant demand from investors to access virtual assets” as the reason for its move into the wealth management space.

Deng Chao, the CEO of the group’s venture capital arm, HashKey Capital, said the service allows it to offer solutions to help tap into the “growing opportunities of virtual assets.”

HashKey pointed to a 2022 study from consultancy firm Boston Consulting Group, which found 0.3% of individual wealth is invested in crypto compared to the 25% invested in equities.

A screenshot from BSG’s 2022 report highlighting the growth potential for crypto. Source: BSG

It claims this signals there is “potential robust demand for virtual assets in the future,” a sentiment that was shared by BSG when it initially published the report.

On Sept. 13, HashKey announced that it had been granted a “Type 9 asset management license” by Hong Kong’s Securities and Futures Commission, allowing it to manage portfolios that only contain virtual assets and likely paved the way for its latest offering.

Related: Hong Kong virtual bank to offer crypto conversions and accounts: Report

In the latest announcement, HashKey also noted that “recent challenges in the crypto market have highlighted the need for deep and reliable liquidity.”

In response, HashKey said it would be expanding its over-the-counter trading service by expanding the number of tokens in its spot market and increasing its liquidity coverage to 24/7.

On Jan. 17 HashKey closed a $500 million investment round for a fund that it plans to use to help push for mass adoption of blockchain and crypto technologies.

Cointelegraph contacted HashKey for comment but did not immediately receive a response.

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Over 80 crypto firms eyeing presence in Hong Kong: Financial Secretary

Since October, more than 80 virtual asset companies have expressed interest in establishing in the city, while 23 have indicated actual plans to do so.

More than 80 virtual asset-related firms across mainland China and foreign nations have expressed interest in establishing a presence in Hong Kong amid efforts from the city to become a leading Web3 hub.

In a March 20 speech in Hong Kong, the Secretary for Financial Services and the Treasury, Christian Hui, stated that Hong Kong has been attracting “interest” from various crypto firms worldwide since October 2022.

Hui noted that since the Hong Kong government released its policy statement on Virtual Asset Development in October 2022, over 80 virtual asset-related companies have expressed interest in “establishing their presence in Hong Kong” as of the end of February 2023.

He added that 23 crypto firms have already indicated that “they planned to establish their presence” in the city. The firms included virtual asset exchanges, blockchain infrastructure and blockchain network security firms.

Hui noted that these companies were interested to learn more about the “implementation details” of the policy statement, regulatory requirements, visa requirements for talent admission and targeted support measures for the virtual assets and Web3 sector.

Hui said that Hong Kong already has over 800 fintech companies and that it is “well-positioned” to be a leading hub for Web3, noting this year’s budget allocation of “$50 million” to “expedite the Web3 ecosystem.”

Related: Hong Kong’s crypto ambition gets subtle nod from Beijing: Report

Hui further reiterated Hong Kong’s plans to establish a licensing regime for virtual asset service providers in June 2023. He suggested this could lead to more crypto firms flocking to Hong Kong, adding:

“Through the establishment of a comprehensive and clear regulatory system, we are expecting more quality VA enterprises to set up businesses in Hong Kong or to seek development opportunities in Hong Kong.”

Hong Kong’s Securities and Futures Commission (SFC) is currently accepting submissions for feedback on its licensing regime as part of a consultation process that will continue until March 31.

It proposed that all centralized cryptocurrency trading platforms operating in Hong Kong must be licensed with the regulatory body.

Hong Kong’s Securities and Futures Commission warn of nonfungible token risks

The regulatory agency’s main concern was the rise of unregulated collective investment schemes in NFTs.

On Monday, Hong Kong’s Securities and Futures Commission (SFC) released a statement warning investors about the risks of nonfungible tokens, or NFTs, which have soared in popularity in recent years. The regulatory body wrote: 

“As with other virtual assets, NFTs are exposed to heightened risks, including illiquid secondary markets, volatility, opaque pricing, hacking and fraud. Investors should be mindful of these risks, and if they cannot fully understand them and bear the potential losses, they should not invest in NFTs.”

However, it appears that the SFC’s specific concern lies in the securitization of NFTs. “The majority of NFTs observed by the SFC are intended to represent a unique copy of an underlying asset such as a digital image, artwork, music or video,” which do not require regulation by the SFC.

But assets that push the boundary between collectibles and financial assets, such as fractionalized or fungible NFTs structured as securities or collective investment schemes (CIS) in NFTs, do fall under the SFC’s mandate. The solicitation of Hong Kong residents by companies engaged in these activities require the issuer to obtain a license from the SFC unless an exemption applies.

CIS has recently gained traction as they present a plausible solution for individual investors to obtain fractional ownership of real-life collectibles that would be otherwise too cost-prohibitive for any single party. Yet, questions persist as to whether such investment structures constitute securitization.

One recent effort launched by the Royal Museum of Fine Arts Antwerp (KMSKA) to tokenize a million-euro classic painting on the blockchain was conducted via debt securitization. The venture met regulatory requirements via the aid of blockchain entities Rubey and Tokeny.