2.1 Globally, the use of virtual tokens and Virtual Assets to raise funding and facilitate economic transactions has been on the rise in recent years. A number of financial services regulators have issued comments or consumer alerts setting out their regulatory position on virtual tokens and/or Virtual Assets. This is especially relevant since the use of virtual tokens and Virtual Assets can be subject to risks arising from fraud, money-laundering and terrorist financing, as well as the observed volatility of the “value” of Virtual Assets.
2.2 The FSRA adopts a technology-neutral approach to regulation, where regulatory requirements are applied to the conduct of Regulated Activities or activities envisaged under a Recognition Order3, as opposed to the technological means to conduct a Regulated Activity. To the extent that virtual tokens are used as a mechanism to enable or facilitate a Regulated Activity to be carried out, they are generally permitted. For example, subject to fit and proper safeguards, an authorised money remittance house may receive fiat currencies from Clients and use virtual tokens to securely remit an equivalent value overseas directly to a regulated foreign counterparty via the internet in real-time; the foreign counterparty can then pay out in fiat currencies to the intended end-clients.
2.3 Given the evolving developments in the space of virtual tokens and Virtual Assets, FSRA will continue to closely monitor industry developments. FSRA may issue further Guidance as necessary, to ensure the regulatory framework is updated and risk-appropriate in order to facilitate the sound development and deployment of promising financial technology innovations.
3 Pursuant to Section 124 of the FSMR, these include activities of Recognised Investment Exchanges and Recognised Clearing Houses.