Why did the Hong Kong SFC change its Crypto Insurance Regulation?

The Hong Kong Securities and Futures Commission (SFC) has reportedly made major changes to its crypto guidelines. The SFC has issued licenses to two crypto exchanges in the region, laying out strict requirements for regulatory approval.

OSL, one of the approved exchanges, reported that the SFC has lowered the mandated insurance coverage on digital assets to 50%.

Hong Kong SFC Relaxes Rules on Crypto Insurance Coverage

In a recent statement, OSL announced its commitment to maintaining a high level of insurance coverage on property, despite recent reductions in regulatory requirements.

“OSL remains steadfast in its commitment to maintain at least 95% of assets under custody, a decision that remains unchanged despite new regulatory guidance allowing virtual asset service providers (VASPs) to reduce assets under custody to 50%.”

He emphasized that ‘crypto's firm commitment to maintaining a high level of insurance for consumers is a response to a changing market. Additionally, several cryptocurrency companies have collapsed in the past few years.

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In particular, FTX, a cryptocurrency exchange, has seen the loss of billions in customer funds.

Insurance will prove useful in the fight for the recovery of the assets of the victims of the FTX failure.

In the year By the end of 2022, billionaires have seen huge losses during the crypto market crash, highlighting the need for strong insurance coverage.

According to data from Statista, Changpeng “CZ” Zhao, the former CEO of crypto exchange Binance, will have a net worth of $82 billion at the end of 2022, following the collapse of a series of crypto companies.

The statement explained that the exchange has issued a 2-year digital asset protection policy with Canopius.

Crypto holders prioritize digital asset insurance

Nicholas Edwards, head of specialist at Canopius, expressed his approval of OSL's aims to ensure a secure platform:

“Our digital asset protection product provides additional customer protection and supports OSL's mission to protect the integrity and security of digital assets in today's financial ecosystem.”

However, crypto users can take out their own personal insurance outside of the exchange.

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Crypto Shield operates a policy that covers owners of assets that are lost from major exchanges.

The insurance policy covers 20 cryptocurrencies including Bitcoin, Ethereum, Ripple, Solana and Dogecoin, as well as stablecoins such as Tether and USD Coin.