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Hong Kong Fund Managers Are Moving Towards Cryptocurrency Investments

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According to reports, Michael Wong, a partner at De Jie Law Firm, stated that since the issuance of guidelines by the Hong Kong Securities and Futures Commission (SFC) in 2019, 10

Hong Kong Fund Managers Are Moving Towards Cryptocurrency Investments

According to reports, Michael Wong, a partner at De Jie Law Firm, stated that since the issuance of guidelines by the Hong Kong Securities and Futures Commission (SFC) in 2019, 10 fund managers in Hong Kong have upgraded their licenses to manage cryptocurrencies. With the necessary Class 9 (asset management) license, fund managers will be able to invest 10% of their total asset value under management in the digital asset sector.

About 10 fund managers in Hong Kong have obtained Category 9 (Asset Management) licenses

Cryptocurrency is a digital asset that has started to gain popularity among investors as the world is moving towards digitalization. Securities and Futures Commission (SFC) has realized the importance of cryptocurrency investments, leading to some changes in its guidelines to accommodate different investment options. This change has led to fund managers gradually inclining towards the digital asset sector.

The SFC Guidelines

The SFC guidelines were issued in November 2019, following an increasing demand for fund managers to invest in cryptocurrency. The guidelines required each fund manager to obtain the Class 9 asset management license to ensure that they are knowledgeable and competent to handle cryptocurrency investments. The license automatically gives fund managers the authority to invest up to 10% of their total asset value under management in the digital asset sector.

The Effect of SFC Guidelines on Fund Managers in Hong Kong

The new SFC guidelines had a significant effect on the fund managers in Hong Kong. According to Michael Wong, a partner at De Jie Law Firm, 10 fund managers upgraded their licenses to Class 9. The process of license upgrade was relatively straightforward, allowing many fund managers to invest in the digital asset sector easily. With cryptocurrency gaining popularity worldwide, it is an excellent opportunity for fund managers to invest and broaden their investment portfolios.

The Benefits of Cryptocurrency Investments for Fund Managers

Investing in cryptocurrency offers various benefits to fund managers. Firstly, it is an excellent opportunity for them to diversify their investment portfolios. The digital assets market is still in its early stages and has higher volatility than traditional investments, making it a risky investment option but equally rewarding too. Secondly, investing in digital assets does not depend on a centralized authority, so it is relatively free from interference by governments or financial institutions. Finally, cryptocurrency investments do not require physical storage, making it easy and cost-effective for fund managers to invest.

Challenges of Investing in Cryptocurrency

Despite the advantages, there are several challenges that fund managers face when investing in cryptocurrency. Cryptocurrency investments are susceptible to hacking attacks, and due to a lack of regulation in the market, the investment could suffer significant losses if the market value drops suddenly. However, these challenges could be mitigated with effective risk management strategies.

Conclusion

The new guidelines issued by the SFC have opened up a new investment avenue for fund managers in Hong Kong. The guidelines make it easier for fund managers to invest in digital assets, offering an opportunity for diversification of their portfolio. While investing in cryptocurrency comes with its own set of risks and challenges, it is evident that Hong Kong fund managers are embracing it and taking steps to mitigate any potential risks.

FAQs

1. Can anyone invest in cryptocurrency?

Yes, anyone can invest in cryptocurrency as long as they meet the requirements set by the respective regulatory authorities.

2. What precautions should fund managers take when investing in cryptocurrency?

Fund managers must be knowledgeable and competent in handling cryptocurrency investments. Effective risk management strategies should be in place to mitigate the risks and prevent significant losses.

3. Are there any restrictions to investing in cryptocurrency?

The guidelines set by the regulatory authorities limit the amount an investor can invest in the digital asset sector. For instance, fund managers in Hong Kong with Class 9 licenses can only invest up to 10% of their total asset value under management in cryptocurrency.

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