Hong Kong’s securities watchdog unveiled new rules for cryptocurrency funds and said it may now regulate crypto exchanges.

The Securities and Futures Commission (SFC) said in a statement on November 1 that fund managers that invest more than 10% of their portfolio in crypto assets will need to be licensed. Trading platforms that serve only professional investors can opt to move into a so-called sandbox, where they will be free to experiment subject to anti-money laundering and other rules.

The moves come as institutional investors begin to invest in the asset class, with some betting that virtual currencies and their underlying blockchain technology will find commercial uses, despite this year’s collapse in crypto prices.

“The market for virtual assets is still very young and trading rules may not be transparent and fair,” – the SFC chief Ashley Alder told a Hong Kong fintech forum on Thursday, explaining the need for oversight. – “Outages are not uncommon as is market manipulation and abuse. And there are also, I am afraid, outright scandals and frauds.”

Crypto exchanges that join the sandbox will be monitored to see how they handle risks and ensure compliance. The firms may be able to apply for a license if the trial is successful, the SFC said.

Karen Chen, former president of UBS (China) Ltd., and now chief executive officer at crypto exchange operator Coinsuper Fintech (HK) Co. Ltd., said her firm would consider joining the sandbox and that a governance framework would better protect investors and promote new technology.

The rules may be strict enough to deter others. Firms won’t be allowed to offer users any financial incentives, or trade futures and derivatives contracts. The SFC also asked exchanges to comply with rules for fair treatment of clients and make efforts to stamp out market manipulation.

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