With the launch of bitcoin futures trading by CBOE and the upcoming launch by CME Group, the Hong Kong securities regulator has outlined legal and regulatory requirements for bitcoin futures contracts.

The Hong Kong Securities and Futures Commission (SFC) has issued a circular on Bitcoin futures contracts and other cryptocurrency-related investment products. It noted:

“Bitcoin Futures have been or will soon be launched by certain well-established futures and commodities exchanges in the United States which are regulated by the U.S. Commodity Futures Trading Commission and authorised by the Securities and Futures Commission (“SFC”) to provide automated trading services. Hong Kong investors may be able to trade in Bitcoin Futures through an intermediary which is a member of these exchanges.”

To that end, the SFC said that parties carrying on a business in dealing in Bitcoin Futures should be licensed for Type 2 regulated activity; intermediaries should strictly observe the suitability requirement; marketing a fund investing in Bitcoin Futures will fall under Type 1 regulated activity and managing such a fund may constitute Type 9 regulated activity.

“The industry is reminded that a party is required to have an appropriate licence with the SFC if it provides any other business services relating to Bitcoin Futures which constitute a “regulated activity”. This is irrespective of whether the party is located in Hong Kong, so long as its business activities target the Hong Kong public,” the SFC clarified.

In September, the SFC issued guidance on how digital tokens issued via ICO, may fall under the definition of securities.