Fintech Market Overview

This article does not constitute legal advice.

Fintech in Hong Kong

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In order to promote innovation, the Hong Kong government has created a range of investment initiatives. The Enhanced Tax Deduction scheme allows for deductions of up to 300 per cent on R&D costs in science and technology. Moreover, the Research and Development Cash Rebate Scheme offers rebates of 40 per cent on spendings incurred on scientific and technological research ventures. Additionally, there are several finance schemes, as well as investment programmes, available to fintech businesses and start-ups in Hong Kong.1

In order to cover the risks and complexities that fintech may bring to the financial and monetary systems, Hong Kong's regulatory authorities use existing regulatory frameworks with specific amendments. No single bureau oversees the development and regulation of fintech specifically. Depending on the nature of the activities, regulatory supervision is spread across a variety of bureaus. The principle of 'same business, same risks, same rules' is adopted in formulating any new regulatory regimes. Hong Kong regulators strive to provide legal clarity to the market, fostering innovation, market development, and investor protection.2

Due to the broad spectrum of services in the fintech industry, there are several licenses applicable to the fintech industry, depending on the type of business being conducted by a corporation. These include:

  • the virtual bank licence, issued by the HKMA, which allows a licence holder to deliver retail banking services through the internet without a physical branch;
  • the payment system and stored value facility licence, also issued by the HKMA, which governs the operation of retail payment systems and stored value facilities;
  • various securities licences, issued by the SFC, which allow a licence holder to carry out specified regulated activities (most likely covering services that involve securities and futures), including licences for Type 1 (dealing in securities) and Type 7 (providing automated trading services) activities, issued by the SFC under the voluntary opt-in licensing regime for virtual asset trading platform (VATP) operators;
  • the money service operator licence (MSO licence), issued by the CED, which allows a licence holder to provide money services; and
  • the money lender licence, issued by a Hong Kong licensing court and monitored by the Hong Kong Police. 2

Licensed intermediaries must act honestly and fairly toward their customers in accordance with the Securities and Futures Commission's Code of Conduct (the SFC Code of Conduct). Additionally, under Paragraph 2.3 of the SFC Code of Conduct, licensed intermediaries must ensure that invitations and advertisements do not contain false, disparaging, misleading, or deceptive information. The SFC has also issued various guidelines that apply to all forms of product advertising (e.g., distribution materials, display-only materials, broadcasts and interactive systems), including:

  • the Advertising Guidelines Applicable to Collective Investment Schemes Authorized under the Product Codes;
  • the Guidelines on use of offer awareness and summary disclosure materials in offerings of shares and debentures under the Companies Ordinance; and
  • the Guidelines on marketing materials for listed structured products. 2

The corporation may also be bound by the SFC's Guidelines on Online Distribution and Advisory Platforms, published in July 2019 (the SFC Online Guidelines), if it operates an automated digital advisory or asset management company.2

Platform operators should follow the SFC's six core principles, among others:

  1. proper design;
  2. information for clients;
  3. risk management;
  4. governance, capabilities and resources;
  5. review and monitoring; and
  6. record keeping. 2

Crowdfunding in Hong Kong

Fintech in other countries

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Hong Kong Fintech Lawyers

Denis Polyakov

Denis Polyakov

Comprehensive legal services for businesses on corporate, tax law, cryptocurrency legislation, investment activities

  1. http://www.itf.gov.hk/l-eng/crs.asp
  2. https://thelawreviews.co.uk/title/the-financial-technology-law-review/hong-kong
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