Out-Law News | 27 May 2021 | 2:36 am | 1 min. read
Cryptocurrency exchanges operating in Hong Kong will be required to be licensed by the market regulator and will only be allowed to provide services to professional investors.
Overseas incorporated companies registered under Hong Kong’s companies’ rules will be allowed to apply for licences as virtual asset service providers (VASPs), according to a note of the Financial Services and the Treasury secretary Christopher Hui Ching-yu. Cryptocurrency exchanges should only be allowed to offer services to professional investors at the initial stage of the licensing regime.
The proposed licensing regime will also exclude legal currencies in digital form such as digital currencies issued by central banks, the note said.
Hong Kong’s Securities and Futures Commission (SFC) will have flexibility to specify characteristics which constitute a virtual asset, whose definition may change in the future, it said.
The government of the Hong Kong Special Administrative Region of China (HKSAR) released a paper outlining the comments received during a consultation on proposals to strengthen anti-money laundering and counter-terrorist financing regulation in Hong Kong. A total of 79 submissions were received during the consultation period from 3 November 2020 to 31 January.
Based on the consultation conclusions, the HKSAR aims to introduce a revised bill into the Legislative Council (LegCo) in the next legislative session.
Paul Haswell, a technology expert at Pinsent Masons, the firm behind Out-Law, said: “Hong Kong and in particular the SFC have been looking at ways to regulate cryptocurrencies and in particular exchanges for some time. Whilst we’ll have to wait to see what the proposed licensing regime looks like when the bill is introduced to LegCo, it’s questionable whether the proposed restrictions will have a major impact on the use and trading of cryptocurrencies in Hong Kong, with non-professional investors using exchanges based overseas already. It does look like the proposed regulation is an attempt to protect Hongkongers from falling from scams involving cryptocurrency, which have been rife in the territory with hundreds of millions of Hong Kong dollars being lost.”