The Hong Kong government intends to propose a licensing system for crypto exchanges, according to a discussion paper published on Monday.
- The proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing bill will designate any crypto exchange as a “regulated virtual asset activity” and any person who seeks to engage in this work must be licensed by the Securities and Futures Commission (SFC) , according to the paper. This applies to companies physically located in Hong Kong or registered in the city.
- In addition, the draft proposes that licensed virtual asset providers can provide services to professional investors only. In January, Hong Kong’s financial regulators released new guidelines restricting retail investors’ access to financial products that invest directly in digital assets.
- Engaging in virtual asset services without a license would be a criminal offense subject to imprisonment and fines. No unlicensed crypto exchanges or persons may promote their services to the Hong Kong public.
- Hong Kong plans to propose these changes to the legislative council in the second quarter. Once the regime is implemented, all crypto exchanges must apply for a license from the SFC within 180 days.
- The secretary for financial services and the Treasury, Christopher Hui Ching-yu, said at a legislative council panel on financial affairs the same day that Hong Kong will consider expanding the scope of virtual asset investors depending on market development and that the regulation will allow room for innovation.