On Thursday, the Hong Kong regulator announced the upcoming guidelines for crypto licensing in the region. The region has been a rising area of interest for crypto firms in recent times.
Speaking at an event, Julia Leung, CEO of Hong Kong’s Securities and Futures Commission (SFC), confirmed that the agency will release guidance on the crypto licensing framework in May.
According to Leung, the consultation process for the regulatory framework for crypto entities in the city is ongoing. She added that there have been more than 150 responses so far. The regulator said the new regulatory framework will become effective by June 1.
This upcoming regulatory framework would mandate all crypto platforms to register with the authorities of the city. With the law, licensed exchanges can offer cryptocurrency trading of major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) to retail traders with the measures that should be implemented to provide a range of “robust investor protection measures.”
The regulator’s proposed regime for virtual asset trading platforms includes robust measures to protect investors, following the ‘same business, same risks, same rules’ principle.
When the regulator first introduced the regime in February, Leung highlighted the reason behind it to be turmoil in the cryptocurrency ecosystem and the collapse of industry players like FTX with investor protection as a priority.
Additionally, the guidelines include conditions like the safe custody of assets, Know Your Customer (KYC), conflicts of interest, cybersecurity, accounting and auditing, risk management, Anti-Money Laundering/counter-financing of terrorism (AML/CFT), and prevention of market misconduct.
Meanwhile, this is part of Hong Kong’s effort to become a financial hub for cryptocurrency in Asia. Two exchanges namely Hashkey and OSL already offer crypto trading services under the supervision of the Hong Kong SFC. More exchanges are expected to follow the trail, mainly because the city’s banking sector also offers support for crypto firms.
Experts have counted on the proposed regulatory guidelines as a positive step toward the industry. The guidelines will add more clarity and subsequently provide more scope for investors’ safety which would invite more participation. Additionally, it will help in increasing vigilance and ensure safety.
While Hong Kong is rising as one of the financial hubs, it is important to note that the region needs to maintain a balance between safety and innovation. Recently, the region has also been reporting increasing cases of crimes involving cryptocurrencies which is sufficient to understand the need for comprehensive regulation.