Lawrence Damilola
The Hong Kong Securities and Futures Commission (SFC) is seeking opinions from industry participants on a proposed licensing regime for cryptocurrency over-the-counter (OTC) services.
The new framework would involve both the SFC and the Customs and Excise Department (C&ED) overseeing companies that provide OTC trading services.
A report from the South China Morning Post highlighted initial plans for the C&ED to solely manage the regulations and licensing for OTC services, as outlined in a proposal made public in February.
OTC trading services allow users to buy and sell cryptocurrencies privately, often facilitating direct high-volume transactions between parties outside traditional exchanges. The SFC has recently initiated consultations with companies currently offering OTC trading services to discuss the potential implementation of a new licensing regime. According to unnamed sources cited by the South China Morning Post, these discussions are still in the early stages.
The SFC has indicated that any new licensing framework would require firms engaging in OTC trading of virtual assets in Hong Kong to comply with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. “Under this plan, operators must obtain licenses and adhere to anti-money laundering and counter-terrorist financing regulations,” noted a report detailing the consultation launched earlier this year. The new approach suggests a joint supervisory role for the SFC and the C&ED, expanding the SFC’s regulatory oversight in this sector.
Meanwhile, the SFC has published an “alert list” of “suspicious virtual asset trading platforms” that may target Hong Kong investors. The list includes unlicensed entities operating in Hong Kong, which has been in effect since January 2020. The SFC stated that “operating an unlicensed virtual asset trading platform (VATP) in Hong Kong became a criminal offense” as of June 1. Currently, only two platforms, Hash Blockchain and OSL Digital Securities, are fully licensed to operate in the region.
The SFC also discusses introducing a licensing framework for cryptocurrency custodian services with companies. According to reports, these discussions are still in the preliminary stages. The report recently sought input from companies currently providing OTC trading services on implementing a new licensing regime for cryptocurrency custodian services.
Hong Kong’s robust OTC market has facilitated a substantial influx of cryptocurrency, with a $64 billion inflow reported between July 2022 and June 2023, according to data from Chainalysis. The city’s focus on regulating OTC services follows incidents like the JPEX scandal and reflects a move to establish a more regulated and legitimate market.
Read More
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- Hong Kong Legislative Council Forms Digital Asset Development and Web3 Subcommittee
- Redefining Regulations: Hong Kong’s Crypto Landscape Takes a New Turn
Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
