DeFi Projects Could Face Regulatory Requirements in Hong Kong

• Hong Kong’s Securities and Futures Commission (SFC) revealed that DeFi projects could be subject to regulatory requirements in the country.
• The agency has previously pointed out the need for regulation of the DeFi ecosystem.
• Companies wishing to offer a collective investment scheme to the public in Hong Kong also require authorisation.

Hong Kong SFC Reveal Regulatory Requirements For DeFi Projects

The Hong Kong Securities and Futures Commission (SFC) has revealed that decentralised finance (DeFi) projects could face licencing requirements and regulation in the country. According to the SFC, these activities fall within the scope of the Securities and Futures Ordinance and will be subject to the same regulatory requirements as traditional finance (TradFi).

Need For Regulation Of The DeFi Ecosystem

The SFC has previously pointed out that there is a need for regulation of the DeFi ecosystem, with limited transparency resulting from a lack of data and unregulated firms and activities creating issues such as financial stability. Market integrity issues such as price oracle manipulation, front-running transactions and investor protection concerns are also an issue.

Licensing Regime For Digital Asset Trading Platforms

Hong Kong’s new licensing regime for digital asset trading platforms takes effect in June 2023, meaning that if a decentralized platform allows trading in virtual assets which constitute securities or futures as defined under the SFO, then both it and its operators are required to have a Type 7 license.

Authorisation Requirements For Collective Investment Schemes

Authorisation requirements are also necessary when companies wish to offer a collective investment scheme to the public in Hong Kong.


Overall, this news suggests that more stringent regulations are on their way for DeFi projects in Hong Kong, with both digital asset trading platforms and collective investment schemes requiring licenses or authorisations before they can conduct business in the country.