The Hong Kong Securities and Futures Commission (SFC) has set a minimum insurance requirement of 50% for licensed crypto exchanges handling customers’ assets. This requirement aims to safeguard investors’ funds in the event of a security breach or insolvency.
OSL Exchange, one of the licensed virtual asset trading platforms in Hong Kong, announced last week that the 50% insurance coverage minimum applies to all assets under custody. To comply with this requirement, OSL announced a two-year partnership with Canopius, a syndicate of underwriter Lloyds of London, for an insurance policy covering 95% of its users’ assets.
Another licensed crypto exchange in Hong Kong, HashKey Exchange, also took steps to protect its users’ assets by signing a crypto insurance agreement with OneInfinity on November 16, 2023. This agreement provides coverage for up to $50 million to $400 million worth of users’ assets and has the potential to expand coverage into incidents related to server downtime, data back-up, and load management in the future.
The SFC’s minimum insurance requirement is part of its broader efforts to regulate the cryptocurrency industry in Hong Kong. Since opening crypto trading to retail investors last August, only OSL and HashKey have been granted virtual asset trading licenses. Thirteen entities are currently applying for such licenses. To obtain a license, applicants must pass stringent due diligence checks, including a traditional financial audit that is broader in scope than proof-of-reserves.