New SFC Circular on Bitcoin Futures
With the much-publicised announcement last month by the US Commodity Futures Trading Commission of the launch of three separate bitcoin futures products by its members, the Hong Kong Securities and Futures Commission (“SFC”) has now issued its own announcement on the trading of these bitcoin futures1.
The SFC have said that although the underlying bitcoin assets - as a virtual commodity - do not come within the ambit of the Securities and Futures Ordinance (SFO)2, Bitcoin futures are nonetheless contracts or options made under the rules of a futures market, which are deemed to be regulated futures contracts for the purposes of the SFO. Therefore, unless a specific exemption applies under the SFO, dealers in such contracts would require a Type 2 licence for dealing in future contracts.
In addition, the SFC note that, unless relevant statutory exemptions apply:
- the marketing of funds that invest in such Bitcoin futures to the Hong Kong public may require a Type 1 dealers licence;
- the managing of such funds may require a Type 9 asset managers licence; and
- the provision of advisory services relevant to such products could amount to advising on futures contracts and thus require a Type 5 licence.
This would also require the regulated intermediaries to comply with relevant conduct in the provisions of these services including, where applicable, the “suitability requirements”3.
The SFC have also taken the opportunity to note again their concerns about the broader range of typically unauthorised products relating to cryptocurrencies as well as their own circular on initial coin offerings in September last year4 which we also covered in an earlier article5.
Publication date: 18 January 2018
- Cap 571 of the laws of Hong Kong
- See Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission
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