Cryptocurrency custody services company InVault, from Shanghai, has launched in Hong Kong just in time to take advantage of the special administrative region’s new rules for cryptocurrency exchanges and asset managers.
At the start of Nov 2018, Hong Kong’s Securities and Futures Commission (SFC) issued guidance on the regulatory standards expected of cryptocurrency exchanges, platform operators, and fund managers. It’s also working on a future “conceptual framework” for the regulation of “trading platform operators.”
NEAR COMPLETE INSURANCE COVER IS NOW REQUIRED
As part of the new guidelines, cryptocurrency exchanges and asset holders must have comprehensive insurance for investors’ funds to prevent losses — which is where cryptocurrency custodial services for high-volume coin-holding businesses come into play. However, cryptocurrency businesses can also look to self-custody and hot wallet storage, as long as they have the required level of insurance. For exchanges storing cryptocurrencies online in “hot wallets,” this is 100% coverage. The regulator says:
The SFC generally expects that the insurance policy would provide full coverage for virtual assets held by a Platform Operator in hot storage and a substantial coverage for those held in cold storage (for instance, 95%).
InVault currently holds around one million ether in custody in mainland China and has announced it is the first custody service operator to enter the market in Hong Kong. The company is backed by venture capital fund Matrix Partners China which has invested nearly $6 billion in the crypto-storage business. It has reportedly gained a new “trust license” from the SFC allowing it to offer a fully automated service in the region as of December.