Crypto start-up AAX sees bitcoin futures to remain unregulated as Hong Kong tightens industry scrutiny

Atom launches new exchange as Hong Kong unveils licensing framework for cryptocurrency assets to protect investors

Backed by London Stock Exchange Technology, AAX offers lower trade latency, more transparent trade data for clients

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(L-R) AAX’s chief operating officer Michael Wong and chief executive officer Thor Chan. Photo: Jonathan Wong

Published: 1:00pm, 7 Nov 2019Updated: 7:16pm, 7 Nov 2019

Atom Group, which launched a new cryptocurrency exchange on Thursday, is studying new guidance from regulators in Hong Kong in the market amid increased scrutiny on trading platforms to protect investors.

The new exchange Atom Asset Exchange, or AAX, comes a day after the Securities and Futures Commission announced a regulatory framework governing virtual asset trading platforms, with chief executive Ashley Alder saying some futures or derivatives contracts that offer high leverage are extremely risky and could potentially be illegal under the law.

“We welcome the SFC’s latest guidance,” AAX said in a statement after the new guidelines. AAX has always envisaged operating in regulated markets for cryptocurrencies that encourage innovation but that also provide investor protections. We see the SFC’s announcement as an important step in that direction.”

The industry has captivated investors with wild returns and spectacular collapses in recent years, raising safety issues for investors and prompting the SFC to update its framework based on an “opt-in” approach to regulate operators and portfolio managers. Some operators, which offer products that do not qualify as a “security” in the SFC’s books, may remain outside the policing.

“I believe that part of the market will remain unregulated for a while,” AAX chief executive Thor Chan said earlier in an interview on Friday, before the SFC announcement. He added in the interview that AAX may not fit into the framework, and the group will instead seek more licences in Asia to build banking relationship to facilitate clients’ trading.

A regulated entity is likely to find it easier to establish banking ties to facilitate the conversion between cryptocurrency and fiat money, some analysts have said. The lack of such support is said to be the key reason for the collapse of Gatecoin in April, one of the oldest virtual exchanges in Hong Kong, as multiple banks refused to deal with its money flow on compliance concerns.

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