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Hong Kong Regulator Lowers Mandated Insurance Coverage for Crypto Exchanges

2 mins
Updated by Kyle Baird
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In Brief

  • The Hong Kong SFC has approved only two crypto exchanges in the region, setting strict criteria for regulatory clearance.
  • OSL discloses that the SFC has modified its regulations reducing the mandated insurance coverage on digital assets to 50%.
  • Despite the regulatory adjustment, OSL emphasizes its dedication to maintaining a high insurance ratio.
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The Hong Kong Securities and Futures Commission (SFC) has reportedly made a significant change to one of its crypto regulations. The SFC has only granted approval to two crypto exchanges in the region so far, imposing rigorous criteria for regulatory clearance.

OSL, one of the approved exchanges, reports 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 insurance ratio for assets despite the recent reduction in requirements by the regulator.

“OSL is steadfast in its commitment to safeguarding at least 95% of regulated assets under custody, a decision that remains unchanged despite new regulatory guidelines permitting virtual asset service providers (VASPs) to reduce insurance coverage to 50% of assets under custody.”

It emphasized that its firm commitment to upholding a high level of insurance for consumers’ crypto is a response to the volatile market. Furthermore, the numerous cryptocurrency firms that have collapsed over the past few years.

Read more: 11 Best Altcoin Exchanges for Crypto Trading in January 2024

Notably, FTX, a now-defunct crypto exchange, witnessed the loss of billions of customers’ funds.

Insurance proves its significance through the struggle faced by victims of the FTX collapse in reclaiming their assets.

The end of 2022 witnessed even billionaires experiencing substantial losses amid the crypto market collapse, highlighting the imperative need for robust insurance coverage.

According to data from Statista, former CEO of crypto exchange Binance, Changpeng “CZ” Zhao, saw his net worth drop by $82 billion by the end of 2022, following a series of crypto firms collapsing.

Billionaires with largest loss in net worth due to cryptocurrency crash worldwide as of December 2022. Source: Statista
Billionaires with largest loss in net worth due to cryptocurrency crash worldwide as of December 2022. Source: Statista

The statement clarified that the exchange has taken out a 2-year digital asset custody policy with Canopius.

Crypto Holders Prioritize Digital Asset Insurance

Head of Specie at Canopius, Nicholas Edwards, expressed approval of OSL’s objectives to ensure a safe platform:

“Our digital asset custody product provides an added layer of client protection and supports OSL’s mission to uphold the integrity and security of digital assets in today’s evolving financial ecosystem.”

However, crypto users are also able to take out their own private insurance outside of the exchange.

Read more: vs. Coinbase: Which Crypto Exchange Is Right for You?

Crypto Shield operates a policy that covers owners for the loss of assets from major exchanges.

The insurance policy covers 20 cryptocurrencies, including Bitcoin, Ethereum, Ripple, Solana, and Dogecoin, plus stablecoins like Tether and USD Coin. 

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Ciaran Lyons
Ciaran is a cryptocurrency journalist based in Sydney, Australia. He particularly enjoys writing about CBDC developments and the practical implementations of cryptocurrency in real-world scenarios. He has also appeared across major television networks in Australia including Channel Ten, Channel Nine and SBS TV. Prior to his foray into cryptocurrency, Ciaran worked as a presenter on national radio station Triple J.