Hong Kong SFC-AFRC expands collaboration on financial regulation and audit of digital asset providers

What's this about?

On the 28th, Hong Kong Securities and Futures Commission (SFC) and Accounting and Financial Reporting Council (AFRC) signed a new memorandum of understanding aimed at expanding cooperation on financial reporting and auditing for digital asset service providers. The Hong Kong securities regulatory authority noted that this memorandum covers the financial and ethical reporting requirements of licensed entities, SFC-licensed digital asset services providers, funds approved by the SFC, and registered open-ended fund companies in addition to its original scope of coverage of related accounting and audit services for listed companies.

Why is signing on the 28th so important for digital finance?

Digital assets have more complex issues than price, such as valuation, asset management, trading and disclosure to licensees or investors; financial reporting and auditing are therefore important tools for demonstrating the existence of record-keeping systems, internal controls and regulatory compliance.

The signing between the Securities Regulatory Commission and the Financial Accounting Standards Board (FASB) will help align regulatory oversight with a broader scope of regulation for licensed digital asset businesses. This collaboration reflects that disclosure standards and audits are not limited to companies listed on stock exchanges, but also cover providers of digital assets and related funds.

The scope of the comprehension register extends to whom?

Based on the SFC's description, this new understanding extends to the following groups:

• Licensed personnel.
• SFC-licensed digital asset provider
• Funds approved by the SFC.
• A registered open-ended fund company.
• Financial statements of registered companies and related accounting audits

Simply put, a licensed digital asset company is required to provide financial information and comply with regulations. Registered funds and open-ended fund companies have similar reporting and oversight responsibilities. The expansion of the Memorandum of Understanding thus signals that both agencies are likely to work together covering both capital markets and licensed Digital Asset businesses.

The potential impact on providers and users of digital assets

For service providers and licensed companies, the likely consequence is that financial documentation preparation and internal audit processes need to be more explicit because auditing isn't just an annual check of numbers but a mechanism for checking whether the company controls risk, has accounting systems in place, and actually complies with regulations.

For users, the implication is that information used to make decisions may be of better quality, such as more audited reports or stronger transparency requirements. However, having a better reporting and audit system does not mean providers are safe in all cases, nor does it guarantee the returns or risks of any digital assets.

How should Thai readers relate to this context?

Thai readers interested in digital assets are often concerned with the use of domestic platforms, currency conversion and regulatory compliance by the office of the Securities Regulatory Commission (SRC) and Thailand's securities market. The signing of the SFC and AFRC in Hong Kong does not have a direct effect on the Thai platform but is an example of expansion of regulation between securities authorities and accounting bodies abroad.

Whether Thai users choose a platform that operates under Thai regulation or opt for one such as Bitkub to buy and sell digital assets, document verification, data disclosure and global accounting standards may be signs that the industry is putting more emphasis on transparency but comparison of providers still needs to look at each platform's Thai policies, ethics, visibility, security and official information.

What should we be looking for next?

The next thing to know is the details of how this collaboration between SFC and AFRC will be applied to licensed companies in the future, including any guidelines or documents that both agencies may release further.

For the general reader, it is important to distinguish between expanded audit collaboration news and price or digital asset movements because these are developments in regulatory oversight and accounting standards rather than information used to evaluate the value of any coin or fund.