In the latest developments, Hong Kong Monetary Authority (HKMA) issued a key notice to crypto custody platforms. Issued to authorized institutions (AIs), the guidelines suggest how safekeeping services for digital assets can be provided. As crypto gains momentum in Hong Kong, many people are getting interested in crypto exchange and digital asset custody platforms.
HKMA circular guidelines
The latest HKMA circular stresses on secure storage of digital assets. Giving instructions to AIs on how digital assets belonging to clients should be handled.
In this respect, there is one very important provision made which expects that AIs would undertake thorough risk assessment while developing policies aimed at reducing any risks of storing digital assets.
Therefore, the guidelines point to the need to have clear governance structures, operational plans, and good risk management practices. Part of these rules is keeping client digital assets separate from the institution’s own assets. Which helps protect them if the institution faces financial problems. And this is the important part.
Digital assets should be handled with utmost care as advised by the HKMA, and this means not sharing seeds as well as private keys. Also, the Securities and Futures Commission (SFC) is working on regulations for crypto trading platforms in Hong Kong. Before the end of February, all cryptocurrency exchanges in Hong Kong will need to be licensed or have applied for one.
Hong Kong heading toward being the crypto hub
This is important because it ensures that virtual asset investors are protected. For instance, SFC rules require that people trade only on licensed exchanges thereby avoiding risks being posed by others. Otherwise, their accounts risk being shut down if they defy these rules.
Hong Kong is aiming to become a major center for cryptocurrency activities. The crypto market here is not only growing under regulations but also seeing a lot of transactions. From July 2022 to June 2023, around $64.0 billion worth of crypto was traded in the region.
A big part of this activity comes from over-the-counter (OTC) markets. Playing a key role, OTC desks conduct large transactions for institutional investors and high-net-worth individuals.
In turn, playing an important role in the city’s crypto economy. The HKMA and Securities and Futures Commission (SFC) are making rules to balance innovation and protect investors. This shows Hong Kong’s commitment to becoming a hub for digital assets, following global security rules.
