Hong Kong Securities and Futures Commission's outgoing chairman Tong Ka-shing told South China Morning Post (SCMP) on Monday the commission was working to bring out regulations related to cryptocurrency trading platforms. The chairman also acknowledged a total ban would not serve the purpose of preventing people from trading, because they would do so in overseas markets despite enforcement. The SFC was therefore considering regulations mainly to "tighten investor protection."

“We do not think imposing a total ban on these platforms is necessarily the right approach, and it will not work in today’s internet world when trading can cross national boundaries. Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets," Ka-shing said.

China has cracked down on the crypto space over the past year or so, with a ban on initial coin offerings in September 2017, and by making it illegal, since July, to use fiat currencies for cryptocurrency purchases. The government even imposed travel bans on Huobi and OKCoin (cryptocurrency exchanges) executives. These moves drove away many cryptocurrency-related businesses from China but did not affect Hong Kong, as it is a specially administered territory of China and has a separate political system. Some business, like the China bitcoin conference BitKan, decided to move to Hong Kong from Beijing following the Chinese crackdown.

Hong Kong SFC is not as rigid as China in its stance on cryptocurrencies. However, the commission seems to share the views of the U.S. Securities and Exchange Commission, which does not classify cryptocurrencies as securities, since Tong said: “We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities."

Trading on cryptocurrency exchange has considerable volumes now, even in Hong Kong. Local exchanges HitBTC and Bitfinex saw transaction volumes of about $850 million and $300 million in 24 hours respectively. Ka-shing said this increase in volumes caught the attention of regulators who are now anxious to get formal cryptocurrency regulations in place.

The SFC regulator opinionated that cryptocurrencies do not fit in the custodian — audit or valuation requirements — normally expected under the Securities and Futures Ordinance.

"No other international market currently has a comprehensive regulatory framework for these cryptocurrency platforms. We need to see if and how these platforms can be regulated to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected,"  Ka-shing added.

Ka-shing will serve his last day as SFC chairman Oct. 19, when he hands over the position to Tim Lui Tim-leung.

Angelina Kwan, chief operating officer of cryptocurrency exchange BitMEX, told SCMP she hoped the regulations Ka-shing spoke about would "keep pace with market developments.”

Hong Kong’s SFC declared in their 2017-2018 annual report, released June 27, that it would keep a close watch on cryptocurrencies and initial coin offerings. The commission also warned traders that new technology came with risks, which is why it planned to intervene when appropriate.

The debate over cryptocurrencies being classified as securities has been going on for a long time now. U.S. SEC Director William Hinman said in June that ether — cryptocurrency token of ethereum — shouldn't be regulated in the same way as stocks and bonds. This was followed by SEC chairman Jay Clayton who said bitcoin was not a security.