Token Admission Criteria 

Matrixport.hk (the “Firm”) must exercise appropriate expertise, caution, and due diligence when choosing Virtual Assets for trading availability on its Platform. Comprehensive due diligence is mandatory for all Virtual Assets intended for trading, regardless of whether they cater to retail Clients. These assets must consistently meet the guidelines set forth by the Token Admission and Review Committee (TARC). 

1. General Considerations 

The Firm, when evaluating a token (or Virtual Asset) for admission to the Platform for trading, will take into account the following non-exhaustive list of considerations: 

1. Background information about the Virtual Asset's management or development team, and any prominent members associated. 

2. The regulatory standing of the Virtual Asset in Hong Kong, and any implications this might have on the Firm's regulatory responsibilities. 

3. Various attributes of the Virtual Asset, such as supply, demand, maturity, and liquidity. The Virtual Asset should have been in circulation for a minimum of 12 months. 

4. Technical aspects related to the Virtual Asset. 

5. The Virtual Asset’s developmental progress. 

6. Market-related and governance risks tied to the Virtual Asset. 

7. Legal risks linked to both the Virtual Asset and, if applicable, its issuer. 

8. Assessment of whether the Virtual Asset's utility, innovative features, control mechanisms, or novel applications seem fraudulent or unlawful, or if its ongoing viability is dependent on continuous new investments. 

9. The enforceability of rights external to the Virtual Asset (e.g., rights to underlying assets) and the potential repercussions of the asset's trading activities on foundational markets 

10. Risks of money laundering and potential funding of terrorist activities connected to the Virtual Asset. 

Please refer to Appendix I for a detailed breakdown of factors that the Firm should take into consideration when deciding whether to admit a Virtual Asset to the Platform, regardless of whether the token is intended for retail trading or not. 

2. Tokens to be Admitted for Retail Trading 

The Firm, prior to making any Virtual Asset available for trading by retail Clients, must also consider additional factors, namely the Firm shall ensure: 

• The token does not fall within the definition of “securities” under the SFO unless it (i) complies with the prospectus requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance and (ii) does not breach the restrictions on offers of investments under Part IV of the SFO. 
• The token is of high liquidity. 

Please refer to Appendix II for a detailed breakdown of additional factors that the Firm should take into consideration if the token is intended to be admitted for retail trading. 

Appendix I – General Token Admission Criteria 

When assessing the eligibility of Virtual Assets to be traded on the Platform, the Firm shall take into consideration the following factors.  

1. The Background of the management or development team of a Virtual Asset or any of its known key members (if any) 

1. relevant material background information of the founder, management or development team (if applicable) of a Virtual Asset to enable the Firm to perform a comprehensive risk assessment of the Virtual Asset and its key members; 

2. if applicable, supporting documentation to enable the Firm to independently verify, among other things: 

1. due incorporation/establishment of the Virtual Asset project; and 

2. direct and indirect beneficial owners/controllers of the Virtual Asset project. 

3. the Firm will take the following factors into consideration: 

1. risks of money-laundering; 

2. jurisdiction the relevant persons are from and the applicable laws and regulations in the relevant jurisdictions that may restrict or prohibit its Virtual Asset activities; 

3. whether the relevant persons are in compliance with the laws of the place in which it is incorporated/established/registered as well as where it undertakes its principal activity. The Firm may request the relevant persons provide the following supporting documentation to aid its risk assessment: 

1. constitutive documents (if applicable) to ensure that the relevant persons are not prohibited to issue, list, sell and trade its Virtual Asset; 

2. legal opinions issued to and for the benefit of the Firm confirming that the issuance, listing, sale and trading of its Virtual Asset do not contravene with the laws of Hong Kong, and the relevant person’s place of incorporation, establishment or registration as well as where it undertakes its principal activity; and 

3. any other legal opinions showing that the relevant persons’ activity is not in contravention of laws, rules and/or regulations in any relevant jurisdictions; and 

4. If, in the Firm’s view, a Virtual Asset is so decentralized and established in the existing market that the background of its management/development team/key members is unlikely to negatively impact its risk assessment (e.g. Bitcoin), the Firm should provide proper documentation outlining its rationale when making such determination; 

2. Legal/regulatory status of the relevant Virtual Asset 

1. written legal advice in the form of a legal opinion or memorandum, to the satisfaction of the Firm, to establish the nature, legal and regulatory status of a Virtual Asset and the implications for the Firm and Platform, whereby the following issues, amongst others, would be addressed: 

1. whether the Virtual Asset constitutes “securities” under the SFO in Hong Kong and in other jurisdictions that the Firm considers relevant; 

2. if not categorized as a security, what legal form the Virtual Assets takes and if so, the laws that the Firm and the Platform may be subject to as a result of admission of the Virtual Asset; 

3. the specific requirements (e.g. licensing or consent) and restrictions (if any) which would apply to (i) the Firm and/or Market Participants in dealing in and marketing the Virtual Assets; and (ii) the Applicant and/or the Virtual Asset issuer for offering, marketing and trading the Virtual Asset, including any selling restrictions; 

4. if applicable, the conditions or requirements under which the Virtual Assets could be transferred (e.g. lock-up restrictions), redeemed or exchanged; 

5. the legal risks associated with the Virtual Asset and where applicable, its issuer;  

6. whether the ownership of the Virtual Asset is transferable via blockchain technology without any other formality to complete the process; and 

7. whether extrinsic rights to the Virtual Asset are legally enforceable (e.g. if the Virtual Asset is a token linked to an underlying asset, whether the rights to the underlying asset are attached to token ownership and the enforceability of such rights). 

2. The Firm’s Compliance and Legal Teams will review the written legal advice with due care and objectivity and if any information in the legal advice is inconsistent with information known to the Firm, reasonable follow-up work will be conducted as necessary. 

3. Market information about the Virtual Asset 

1. Market data covering the supply, demand, maturity and liquidity of a Virtual Asset. See below for a list of relevant datapoints: 

1. market capitalization; 

2. circulating supply and total supply; 

3. average daily trading volume/turnover; 

4. historical volatility; 

5. number, identity and geographical region of venues on which trading may occur (taking into account the decentralized nature of Virtual Assets and the multitude of venues for trading in Virtual Assets, such assessment should be focused on the major existing trading venues); 

6. common trading pairs on the major existing trading venues identified in (e) above; 

7. spread of holders and traders; 

8. designated market makers, liquidity providers or authorized dealers or resellers; and 

9. product structures or terms that may have concentrative or dilutive effects. 

2. When reviewing market information of a Virtual Asset, the Firm will assess the market risks of such Virtual Asset taking into account its track record of at least 12 months (except for security tokens). 

4. Technical aspects of the Virtual Asset 

1. The following information (if available) regarding the technical aspects of the Virtual Asset: 

1. the token standard of the Virtual Asset (e.g. ERC-20);  

2. the type of consensus algorithm and any open-source codes relevant to the Virtual Asset; 

3.  the technical expertise of the issuer/development team of the Virtual Asset. In particular, whether they have the required capabilities to respond proactively to security threats which may jeopardize the existence or value of the Virtual Asset; 

4. the security infrastructure of the blockchain protocol underlying the Virtual Asset (such as whether robust bug bounty programs have been implemented to discover and mitigate potential security risks); 

5. for smart-contract based Virtual Assets, any smart contract audit conducted by a reputable independent assessor showing that the smart contract is not subject to any contract vulnerabilities or security flaws to a high level of confidence. The qualifications of the independent assessor should also be disclosed; and 

6. the size of blockchain and network, including its potential barriers to scaling and ability to grow and handle user adoption, including the existence, description or indication of: 

1. susceptibility to an attack e.g. 51% attack by miners of the network’s mining hash rate or computing power; 

2. a clear timeline with stages of development, reasonable project milestones, or built-in development incentives; and 

3. barriers to scaling the network, with proposed solutions. 

For the avoidance of doubt, resource consumption costs for validators and miners are not to be treated as main barriers or deterrents to participation or scaling. 

2. Technical papers in respect of the Virtual Asset or project should be attached to the proposal. 

5. Development of a Virtual Asset 

1. The following information regarding the development of a Virtual Asset: 

1. The whitepaper and supplements (if any) of a Virtual Asset, detailing the use cases (if any), stages of development and/or project milestones of the Virtual Asset; 

2. any information relevant to future/planned developments of a Virtual Asset (e.g. updates/network upgrades/changes to the consensus mechanism or utility that may cause the nature/legal status of a Virtual Asset to change. 

2. The Firm will take into consideration whether the use cases offered, technical, structural or cryptoeconomic innovation of the Virtual Asset appears to be legitimate and whether the development or continued viability of the Virtual Asset depends on attracting continuous inflow into the Virtual Asset. 

6. Governance risks of Virtual Asset 

1. Information about the governance of a Virtual Asset, such as operating expectations and decision-making framework that underlie its infrastructure; 

1. where there is a Virtual Asset issuer, governance information should relate to the management team and governance of the issuer; 

2. where there is an underlying project supported by the issuance of the Virtual Asset, the governance information should related to the underlying project; and 

3. where there is an embedded governance or control framework built into the infrastructure of the Virtual Asset, the governance information should relate to such infrastructure. 

2. The Firm, when assessing governance risks of a Virtual Asset, will take into account factors such as:  

1. whether there is a structured process to propose and implement major updates to the source code, or whether there is a system or voting process for conflict resolution; and 

2. whether a Virtual Asset’s management and development team, vision, strategy, use cases and roadmap to achieve the stated objectives are clearly set out in its whitepaper and are reasonable.  

7. Money laundering and terrorist financing risks associated with the Virtual Asset 

1. The use cases of the Virtual Asset and the potential risks relating to money laundering and terrorist financing. 

2. The Firm, when assessing the risks of money laundering and terrorist financing associated with the Virtual Asset, will take into considering the following factors: 

1. whether the Virtual Asset has privacy-preserving features (e.g. privacy coins); 

2. whether transactions in the Virtual Asset have features that obfuscate information of wallet addresses, the originator or the beneficiary; 

3. whether the Virtual Asset has functions or features that are in contravention of any applicable anti-money laundering standards (e.g. FATF recommendations, guidance or interpretative notes); and 

whether the features and purpose of the Virtual Asset is clear and the intended applications or capital raising purposes are legitimate. 

Appendix II – Token Admission Criteria (for Retail) 

Assessment of whether the Token is to be determined as a Security by the SFO 

The Firm will apply appropriate due diligence in ensuring that the token being offered to retail Clients does not fall within the definition of “securities” as per the SFO, unless the offering of such Virtual Asset to retail Clients complies with the prospectus requirements for offering of shares and debentures under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32) and does not breach the restrictions on offers of investments under Part IV of the SFO. The Token Listing team may also seek a legal opinion to ensure that the token being considered is not a security. 

Assessment of liquidity of Virtual Assets meant to be offered to Retail Clients 

As per the SFC’s Guidelines, to assess the liquidity of a specific Virtual Asset for trading by retail Clients, the Firm must, at a minimum, ensure that the Virtual Asset is an eligible large-cap Virtual Asset. This will be established when the specific Virtual Asset has been included in at least two acceptable indices issued by at least two different index providers (the two index providers should be separate and independent from each other, the issuer of the Virtual Asset and the Firm). Further, at least one of the indices should be issued by an index provider which complies with the IOSCO Principles for Financial Benchmarks and has experience in publishing indices for the conventional securities market.  

Assessment of Acceptable Indices 

The Firm shall refer to the following criteria when assessing whether an index is an “Acceptable Index” 

• The index should have a clearly defined objective to measure the performance of the largest Virtual Assets in the global market; 
• The index should be investible (the constituent Virtual Assets should be sufficiently liquid); 
• The index should be objectively calculated and rules-based; 
• The index provider should possess the necessary expertise and technical resources to construct, maintain and review the methodology and rules of the index; 
• The methodology and rules of the index should be well documented, consistent and transparent; 

On the basis of these guidelines, the Firm has identified and shortlisted the index providers listed in the table below to facilitate the assessment of liquidity of Virtual Assets. 

Virtual Assets not meeting the Eligible Large-Cap Requirement 

In case the Firm wishes to make a Virtual Asset that fulfils all token admission  criteria except for the eligible large-cap requirement available for retail trading, the Firm shall submit a detailed proposal to support its view that the Virtual Asset is of high liquidity and suitable for retail trading for the SFC’s consideration on a case by case basis. In its proposal, the Firm shall make use of reliable data sources for ascertaining and proving that such Virtual Assets is of high liquidity. Factors to be considered in determining would include the following: 

• The project’s market capitalization. 
• The Firm’s ability to verify the authenticity of market capitalization through communication with project’s team for details such as initial token distribution, private allocations, locked addresses, team-controlled addresses and addresses containing portions of supply allocated for future use. 
• Significance of liquidity/trading activity with normal bid-ask spreads across sufficient sources of market data. 
• Absence of significant price discrepancies across major exchanges (e.g. Binance, OKX, Coinbase, Crypto.com etc) 
• The token is traded on at least three exchanges that possess a number of the following attributes: 

• Minimal data irregularities. 
• Publishes granular API endpoints. 
• Active product development and communication from the team. 
• Active/engaged community of a considerable size. 
• Accredited/Audited by a reputable 3rd-party. 
• DATA Partner. 
• Regulated/Licensed.