The Securities and Futures Commission (SFC) of Hong Kong today released new proposals for regulating the cryptocurrency industry and called for public feedback.

The proposed regulatory guidelines, expected to come into effect on June 1, are part of Hong Kong's efforts to compete with Singapore as Asia's digital asset hub. 

Last year, the SFC allowed individual investors to trade a limited set of crypto-related derivative products. The regulator has also recently approved exchange-traded funds for individual investors that track crypto futures.

To protect the rights of retail investors, according to a press release on Monday, the regulator requires all cryptocurrency trading platforms operating in Hong Kong, as well as those that market their services there, to be licensed.

“In light of the recent turmoil and the collapse of some leading crypto trading platforms around the world, there is a clear consensus among regulators globally for regulation in the virtual asset space to ensure investors are adequately protected, and key risks are effectively managed,” said SFC CEO Julia Leung.

Those who do not plan to apply for a license should start preparing for an orderly closure of their business in Hong Kong, said the regulator.

According to the regulator, cryptocurrency exchanges and service providers will also be required to meet higher standards for asset safekeeping, know-your-customer practices, conflicts of interest, cybersecurity, accounting and auditing, risk management, and anti-money laundering.