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New legislation tailored to regulate the crypto area in Hong Kong aims to implement a licensing regime for crypto service providers. The respective changes to the region’s anti – money laundering (AML) rules have been submitted to its legislature while a recently published report examines relevant threats.
Changes designed to govern the Hong Kong cryptocurrency market have been presented to members of the Legislative Council of China’s special administrative region. The bill 2022 on the fight against money laundering and the financing of the fight against terrorism, which was published in the Government Gazette in June, needs their approval in two readings to become law.
The authors of the draft seek to introduce licensing for virtual asset service providers (VASP) and registration for resellers of precious metals and stones (DPMS). The aim is to impose on the companies operating in the two sectors anti-money laundering and terrorist financing.
Devices that work with cryptocurrencies that want to launch a trading platform, for example, must obtain a license from the Hong Kong Securities and Futures Commission (SFC) and meet a number of requirements. The proposal takes into account the recommendations of the Financial Action Task Force on Money Laundering (FATF) which sets the global standards in this area.
The new requirements for VASPs are comparable to those applicable to traditional financial institutions, and they will have to meet similar requirements for financial adequacy, noted Andrew Leelarthaepin, Bitstamp’s CEO of Asia Pacific, in an article published by South China . Morgenpost. In his opinion, it recognizes crypto companies as part of Hong Kong’s financial system. The leader elaborated:
Simply put, VASPs can expect to be regulated to the same standard as our institutional customers. The law recognizes VASPs as equal organizations in the financial sector.
Under the forthcoming legislation, SFC will also be responsible for ensuring that virtual asset service providers adopt appropriate listing and trading policies as well as financial reporting and disclosure procedures. The Commission will also observe the implementation of mechanisms designed to prevent market manipulation and conflicts of interest.
While legislators are preparing to approve the new regulatory framework, the latest edition of Hong Kong’s report on risk assessment of money laundering and terrorist financing has placed particular emphasis on the threats and vulnerabilities in the crypto area. While acknowledging their potential and growing popularity, the document also highlights the vulnerability of virtual assets to various risks and the challenges they pose to investor protection.
How do you think the new regulations will affect the crypto industry in Hong Kong? Share your expectations in the comments section below.
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