Hong Kong is considered one of the most attractive crypto destinations in the world. Consequently, there are certain regulations that crypto businesses need to know about staying compliant in Hong Kong, such as the anti-money laundering (AML) regulations. Over the past year, Hong Kong has introduced legislation to promote and adopt cryptocurrencies, for which with the regulation over the licensing, it has solidify its status as a hub for the crypto-market
The Hong Kong Securities Futures Commission (SFC) has finally taken a step forward with the start of applications for licences to run trading platforms and exchanges. According to Julia Leung, CEO of the Securities and Futures Commission. “Hong Kong’s comprehensive virtual assets regulatory framework follows the principle of ‘same business, same risks, same rules’ and aims to provide robust investor protection and manage key risks”
In this sense, accordingly “requirements for obtaining a licence include capital of at least 5 million Hong Kong dollars ($638,000), measures to combat money laundering and the appointment of experienced managers”[1]. Hence, those who do not plan to obtain the licence under the requirements should proceed to a proper closure of their business in Hong Kong.
As a consequence of the granting of licensing, Hong Kong crypto-market will undoubtedly grow as Chinese companies are particularly interested to enter Hong Kong, as they face a total ban on providing cryptocurrency-related services at home.
All of the above stems from the fact Hong Kong launched a licensing regime for crypto service providers and exchanges with a deadline of June 1. As a consequence, the SFC announced last may that licensed crypto platforms would be allowed to serve retail customers. In fact, Huobi Earn became the first member of the Hong Kong Virtual Assets Consortium on May 31 which was possible according to a spokesperson from the firm due to the fact that “Hong Kong regulations allow existing virtual assets platforms to operate for an extra year without a licence.”[2] Following that Gate.io also announced it was applying for a virtual asset licence, as it had already operated in Hong Kong since August 2022
The SFC requirements for obtaining a licence includes that “it has compulsory insurance/compensation arrangement requirements in place to help protect clients. Further, it has a 98% cold wallet storage requirement that licensed corporations would need to comply with”[3]. Such requirements are in place to assure proper behaviour from the exchanges aiming at the protection of the clients, the market, and the economy. All that is accomplished as the requirements result in that only the best virtual asset service providers would be able to comply with the monetary and operational criteria from the SFC.
The main exchanges as Binance and Bitfinex have declared that they welcome the progressive regime that Hong Kong is having as it aims at favouring the crypto environment, a thing for which it is assumable that the big exchanges with presence in Asia will, sooner or later apply for a licence under the new regime in Hong Kong.
Although China mainland will continue its policy of banning the exchanges, Hong Kong will still pursue an approach towards pro-crypto, which potentiates Hong Kong as a hub in the sector as the perspective is likely to become a getaway for crypto users and interested parties in China.
The following link provides for the PDF issued by the SFC on the Consultation Conclusions on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the Securities and Futures Commission: https://apps.sfc.hk/edistributionWeb/api/consultation/conclusion?lang=EN&refNo=23CP1
[1] https://asia.nikkei.com/Spotlight/Cryptocurrencies/Hong-Kong-opens-crypto-exchange-licensing-ahead-of-retail-trading
[2] https://cointelegraph.com/news/hong-kong-s-regulatory-lead-sets-it-up-to-be-major-crypto-hub
[3] https://cointelegraph.com/news/hong-kong-s-regulatory-lead-sets-it-up-to-be-major-crypto-hub
