By Hong Kong on Thursday announced a consultation on regulating over-the-counter (OTC) crypto trading.
The Financial Services and the Treasury Bureau consultation seeks to establish a conceptual framework for licensing virtual asset OTC services. Under the regime, operators would be mandated to obtain licenses and comply with anti-money laundering and counter-terrorist financing rules.
It states that anyone trading virtual assets in Hong Kong would need a license from the Commissioner of Customers and Excise (CCE). However, Virtual Asset Trading Platforms (VATPs) are exempt, as they are already regulated under the Securities and Futures Commission (SFC).
Those who have obtained a compliant exchange or stablecoin issuer license are exempted.
— Wu Blockchain (@WuBlockchain) February 8, 2024
FSTB Invites Written Feedback on Consultation until April 12
Powers will be granted to the CCE to enforce the regime and regulate licensed VA OTC service providers, under statutory requirements.
“The legislative proposals constitute an important element in the Government’s efforts to develop a robust and transparent regulatory environment for the sustainable development of VA and Web3,” a government spokesperson said.
Those who hold a compliant exchange or stablecoin issuer license are exempt from this requirement.
Earlier this week, FSTB Secretary Christopher Hui warned of risks associated with OTC venues. He cited their accessibility and history of involvement in fraud cases.
The Financial Services and the Treasury Bureau (FSTB) said it will accept written comments on the consultation up to April 12.
Deadline Looms for Hong Kong-Based Crypto Exchanges
Hong Kong has been positioning itself as a crypto hub to attract new capital and talent. It also appears to want to reclaim its position as a global financial hub, looking to tap into growing industry interest and investment.
The government is keen to embrace the crypto ecosystem. This is evident through implementation of fresh regulations to oversee crypto exchanges and enable trading for retail investors.
Earlier this week, Hong Kong’s SFC issued a warning to crypto investors. They advised using only licensed trading platforms and urged verifying the status of the exchanges they’ve signed up for.
The announcement comes as Hong Kong-based virtual asset trading platforms must apply for licenses by Feb. 29 or cease operations by the end of May.
Hong Kong is also set to follow the US in approving spot Bitcoin ETFs. In December, both the SFC and the Hong Kong Monetary Authority announced they would accept applications for virtual asset spot ETFs. They also provided standards of conduct for intermediaries looking to distribute these funds.
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