Hong Kong is looking to reinforce stricter rules with it comes to cryptocurrency rules and regulations. They plan to bring exchanges, traders and other cryptocurrency related ventures under the purview of the Securities and Futures Commission (SFC).

As compared to mainland China, where all crypto-related commercial activities are banned, Hong Kong has been seen as the go-to market for Initial Coin Offerings (ICOs). Although the growing problems of fraud and money laundering have brought the regulatory body into action.

As per the SFC’s guidelines, investment funds would require mandatory licensing if more than 10 percent of their managed assets consist of Bitcoin or any other cryptocurrencies. The related products will only be sold to professional investors.

Exchanges will be provided with a “regulatory sandbox” which will enable them to test their digital currency products as a part of a voluntary scheme which will help them decide whether they should apply for a license.

The proposed regulations will be implemented in stages. This means that companies whose tokens have existed for more than 12 months will be allowed to issue ICO for tokens. Furthermore, they will need to abide by the various requirements put forward by the SFC.

SFC sent warning letters to seven local exchanges back in February after it received complaints from investors as they were unable to withdraw fiat or cryptocurrencies from their accounts. Some of these exchanges were known for misappropriating assets and also manipulating the market.

Back in March of this year, Black Cell Technology was ordered to halt its ICO while also being charged for conducting unauthorized promotional activities.

As a global fight to stop money laundering, the group of 20 leading economies across the world are looking for ways to regulate virtual currency assets to bring a structure to the cryptocurrency market.

Daisuke Yasaku, Daiwa Institute of Research talked about the direction that these regulations are going and how it will impact the cryptocurrency sector.

Timothy Loh, a law firm manager said

“The requirements of the SFC initiative may prove too burdensome for some operators.”

It is speculated that higher trading costs can also result in discouraging institutional investors from entering the market. Although tighter regulations will also lead to increased investor confidence in the long run.