Hong Kong rolled out new rules on Thursday to guide the cryptocurrency industry in the Chinese special administrative region. Crypto exchanges operating in the jurisdiction are now required to get licensed to offer their services to retail traders.

Hong Kong Legalizes Crypto Trading

Agency France Presse reported that the new rules include a provision to protect investors by tasking exchanges to assess their clients’ level of knowledge on cryptocurrencies before onboarding. Additionally, exchanges are being urged to limit investors’ risk exposure with tradable cryptocurrencies confined to those with large market capitalization such as Bitcoin.

On the other hand, the regulation rules out stablecoins, crypto derivatives and staking products. This means that exchanges in the jurisdiction will only be able to offer crypto sport trading to their clients.

However, crypto firms in Hong Kong have a one-year transition period before the license requirement will be enforced, the outlet said. Already, Hong Kong’s financial regulator has received ‘a handful of applications’.

In March, Christian Hui, Hong Kong’s Secretary for Financial Services and the Treasury, disclosed that over 80 cryptocurrency firms both foreign and in Mainland China had expressed an interest in obtaining the required license to set up local branches in the jurisdiction. This is even as reports of the financial hub’s plan to legalize digital assets first emerged late last year.

Previously, Finance Magnates reported that digital asset companies, such as BitMEX and CoinEx, launched customized services for Hong Kong users ahead of the new crypto regime. On Thursday, First Digital Group, a financial institution that offers services, such as custody, clearing and settlement to the digital asset industry, announced that it is launching FDUSD, a US dollar stablecoin.

The stablecoin is to be issued by the Group’s trust company registered in Hong Kong. However, in line with the new crypto rules, the stablecoin will not be available to retail investors in the region.

Crypto in Asia

With the launch of the new crypto rules, Hong Kong has achieved a milestone in its effort towards becoming a top crypto destination. This is in stark contrast to China’s continued hard stance against digital assets.

Across the wider Asia region, financial watchdogs are making moves to put the cryptocurrency industry under their control. Japan is starting this month with plans to enforce strict anti-money laundering measures on cryptocurrency transactions.

Furthermore, contrary to Hong Kong’s move, Singapore is developing plans to restrict retail investors’ participation in the cryptocurrency industry. The country’s regulator in April put forward proposals to limit the marketing of financial products in both the physical and digital space.

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