Hong Kong’s Securities and Futures Fee (SFC) requires public suggestions on its newly proposed licensing regime for cryptocurrency exchanges set to take impact from June 2023.
A key consideration of the general public session window is whether or not to permit licensed exchanges to serve retail traders within the nation and what measures ought to be applied to supply a variety of “sturdy investor safety measures.“
The SFC introduced the session course of on Feb. 20, outlining a brand new licensing regime for the business which proposes that each one centralized cryptocurrency buying and selling platforms working in Hong Kong have to be licensed with the regulatory physique.
The SFC’s proposed regulatory pointers are based mostly on present necessities for licensed securities brokers and automatic buying and selling venues, whereas modifications have been made to a number of the present stipulations.
A press release from SFC CEO Julia Leung highlighted the “latest turmoil” within the cryptocurrency ecosystem and the collapse of business gamers like FTX as a major purpose for clear regulatory pointers for the business with investor safety prime of thoughts:
“As has been our philosophy since 2018, our proposed necessities for digital asset buying and selling platforms embody sturdy measures to guard traders, following the ‘identical enterprise, identical dangers, identical guidelines’ precept.”
Based on the announcement, any individual or enterprise offering cryptocurrency-related companies should apply for a license from the SFC. Moreover, numerous necessities are set out for cryptocurrency exchanges and repair suppliers.
This features a host of stipulations, together with the protected custody of property, Know Your Buyer, conflicts of curiosity, cybersecurity, accounting and auditing, danger administration, Anti-Cash Laundering/counter-financing of terrorism and prevention of market misconduct.
Associated: Hong Kong watchdog goals to limit retail merchants to liquid merchandise
Companies that intend to proceed working and making use of for a license are inspired to evaluate and revise present programs and controls to satisfy the necessities of the upcoming regime. Exchanges and repair suppliers that don’t intend to use for a license must put together to shut down their companies in Hong Kong.
Hong Kong’s SFC additionally intends to publish and keep an inventory of licensed cryptocurrency exchanges and repair suppliers to tell most people of the registration statuses of various companies.
The 361 web page doc is exhaustive, outlining the important thing proposed regulatory necessities for licensing in addition to pointers for implementing AML controls and a number of different obligations for the business.
Maybe most pertinent is a bit associated to the proposal to permit retail entry to licensed cryptocurrency buying and selling platforms. The present Securities and Futures Ordinance (SFO) regime has been in place since 2018, which initially restricted SFO-licensed platforms to serving skilled traders.
The documentation notes that suggestions from the general public has highlighted the assumption that denying retail entry to cryptocurrency markets might lead to investor hurt on condition that people could also be pushed to commerce on unregulated abroad platforms that are accessible on-line.
Based on the SFC, simply two buying and selling platforms are at the moment licensed below the SFO, whereas the SFC has launched cryptocurrency-focused insurance policies which have facilitated gradual retail funding to restricted cryptocurrency asset publicity.
In October 2022, the SFC approved a regime for cryptocurrency futures exchange-traded funds, giving retail traders oblique entry to those markets via regulated merchandise.
In the meantime numerous licensed brokers and fund managers have begun providing cryptocurrency- associated companies to traders below the SFC’s supervision. This has been one other key driver within the SFC’s transfer to permit all kinds of traders to have entry to cryptocurrencies via licensed platforms from June 2023.
As beforehand reported by Cointelegraph, Hong Kong-based monetary service suppliers had begun to investigate about licensing necessities after an modification to the Anti-Cash Laundering and Counter-Terrorist Financing Ordinance in December 2022.
