November 7, 2019, | AtoZ Markets – Atom Group, a Hong Kong-based cryptocurrency exchange has officially launched amid a tightening of Asia’s crypto-regulatory framework. On November 7, the South China Morning Post (SCMP) reported that the Atom Asset Exchange (AAX) implements the Millenium Exchange matching engine technology. The London Stock Exchange (LSE) developed that engine.
On its launch, AAX promised potential clients lower trade latency and trade data transparency.
AAX Cryptocurrency Exchange launches in Hong Kong amid SFC warning
This launch came just a day after Hong Kong’s securities regulator announced new guidance for the domestic crypto exchanges. Furthermore, the Securities and Futures Commission (SFC) indicated that cryptocurrency trading linked to security offering or futures contracts will now go under its remit as regulated activities.
However, the significance of that announcement was underscored by industry commentator Dovey Wan. She is a founding partner of Primitive Ventures, a blockchain investment firm. In that context, the SFC said that a license would be necessary for crypto futures products except for the cases where exemptions apply. It published:
“Hong Kong hosts many virtual asset trading platforms which pose serious investor protection issues. Many of these may decide not to seek an SFC license under the new regulatory framework. This is a course of action which is open to them just by ensuring that no virtual asset traded on their platforms is a ‘security’ or ‘futures contract.’”
According to SFC's chief executive Ashley Alder, various crypto futures or derivatives contracts offering high leverage are highly risky. Hence, this high-risk nature may probably make them be considered illegal in the region.
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AAX’s Uncertainty
In spite of the new developments, Thor Chan, AAX CEO, said that he does not believe that AAX fits into the SFC’s regulatory framework. Furthermore, he emphasized that the platform may instead seek more licenses across the Asian region to create strong banking relationships.
“Under the framework proposed by the SFC, I believe that part of the market will remain unregulated for a while,” says Chan.
In response to the SFC’s latest warning, the company said:
“We welcome the Securities and Futures Commission’s latest guidance. AAX has always envisaged operating in regulated markets for cryptos that encourage innovation but that also offer investor protections. We see SFC’s announcement as a significant step in that direction.”
Another report claimed that the SFC’s licensing regime for crypto fund managers that came in October 2018 has achieved just one approval.
The report also highlighted the new requirements that detailed how cryptocurrency exchanges must approach various issues. The main issues include custody, compliance issues like Anti-Money Laundering (AML) and Know Your Customer (KYC) rules, among several other issues.
Moreover, in March 2019, the Securities and Futures Commission released regulatory guidelines for STOs. This suggests that security tokens will likely be classified as securities under Hong Kong’s Securities and Futures Ordinance. Therefore, they will eventually fall under current securities laws.
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