Hong Kong outlines upcoming crypto licensing regime

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Hong Kong’s Securities and Futures Commission (SFC) is soliciting public feedback on a newly proposed licensing regime for cryptocurrency exchanges, which is due to come into effect from June 2023.

Key considerations for the public consultation window are whether licensed exchanges are permitted to offer services to domestic retail investors, and what measures are taken to provide various “robust investor protection measures.” whether such measures should be taken.

SFCMore announced A February 20 consultation process outlines a new licensing regime for the industry, proposing that all centralized cryptocurrency trading platforms operating in Hong Kong must be licensed by the regulator. .

The SFC’s proposed regulatory guidelines are based on existing requirements for licensed securities brokers and automated trading facilities, but with some changes to existing assumptions.

In a statement, SFC CEO Julia Leung cited “recent turmoil” in the cryptocurrency ecosystem and industry players like FTX as key reasons for clear regulatory guidelines for the industry that put investor protection first. collapse is emphasized.

“As has been our philosophy since 2018, the proposed requirements for crypto-asset trading platforms include robust measures to protect investors, following the principle of ‘same business, same risks, same rules’. contained. “

According to the announcement, any individual or company providing cryptocurrency-related services must apply to the SFC for a license. Additionally, many requirements are set for cryptocurrency exchanges and service providers.

This includes many prerequisites such as secure asset custody, client verification, conflict of interest, cyber security, accounting and auditing, risk management, anti-money laundering/counter-terrorism financing, and market fraud prevention. will be

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Companies intending to continue operating and to apply for licenses are encouraged to review and modify their existing systems and controls to meet the requirements of the upcoming scheme. Exchanges and service providers that do not intend to apply for a license should prepare to close their operations in Hong Kong.

Hong Kong’s SFC will also publish and maintain a list of licensed cryptocurrency exchanges and service providers to inform the public of the registration status of various companies.

As previously reported by Cointelegraph, Hong Kong-based financial services providers have started inquiring about licensing requirements after the December 2022 amendments to the Anti-Money Laundering and Combating the Financing of Terrorism Ordinance (AMLO).