The Securities and Futures Commission (SFC) of Hong Kong is seeking public input on its recently proposed licensing system for cryptocurrency exchanges, which is slated to go into effect in June 2023.
Whether to permit regulated exchanges to retail service investors in the nation and what steps should be taken to offer a variety of “strong investor protection measures” are two important issues that need to be addressed during the public consultation session in Hong Kong.
On February 20, the SFC announced the start of a consultation process defining a new licensing system for the sector that would require all centralized cryptocurrency trading platforms operating in Hong Kong to get a license from the regulatory agency.
The SFC’s proposed regulatory standards have been modified to address some of the current conditions for registered securities brokers and automated trading platforms.
According to a statement from SFC CEO Julia Leung, the “recent upheaval” in the cryptocurrency ecosystem and the demise of crucial firms like FTX are the main drivers behind the need for clear regulatory standards for the sector that prioritize investor protection:
“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle.”
Each individual or company offering services linked to cryptocurrencies is required, according to the notice, to seek a license from the SFC. In addition, there are guidelines for service providers and bitcoin exchanges.
The secure custody of assets, Know Your Customer, conflicts of interest, cybersecurity, accounting and auditing, risk management, anti-money laundering/counter-financing of terrorism, and market misbehavior prevention are just a few of the necessities that come with this.
Reviewing and updating current systems and controls to conform to the standards of the forthcoming regime is suggested for businesses that plan to continue operating and submitting licensing applications. Exchanges and service providers will need to be ready to shut down their operations in Hong Kong if they do not plan to seek a license.
In order to educate the general public about the registration statuses of various businesses, Hong Kong’s SFC also plans to publish and maintain a list of authorized cryptocurrency exchanges and service providers.
Cointelegraph recently reported that after a change to the Anti-Money Laundering and Counter-Terrorist Financing Law in December 2022, financial service firms with offices in Hong Kong started to inquire about licensing requirements.
