Hong Kong’s government is poised to change the rules for cryptocurrency trading firms operating within the city’s jurisdiction.
Financial regulators worldwide are still in the process of formulating the best approach for regulating the cryptocurrency industry. Until now, Hong Kong — home to many crypto exchanges — has been somewhat laissez-faire in this sense.
In contrast, similar Asian financial centers, such as Japan and Singapore, have licensing regimes requiring uniform regulation of all crypto trading platforms.
Further Regulatory Crackdown
In a statement reported by Reuters on Tuesday, the city’s top financial watchdog announced that all cryptocurrency trading platforms would soon be regulated whether they trade securities or strictly cryptocurrency in Hong Kong. The move represents a departure from its previous “opt-in” approach.
Before this news, Hong Kong’s Securities and Futures Commission (SFC) ran with an ‘opt-in’ regulatory framework for crypto trading platforms.
But according to a speech given by Ashley Alder, chief executive of the SFC, current rules are not enough:
“under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security”
Alder went on to say that, as a result, the Hong Kong government would propose a new licensing regime under its anti-money laundering legislation, “requiring all cryptocurrency trading platforms that operate there, or target investors in the city, to apply for an SFC license.”
Alders’ announcement was echoed and expanded upon by Clara Chiu, Director, Licensing and Head, Fintech unit, in a speech at Hong Kong fintech week.
According to the newly proposed rules, at first, crypto platforms will only be allowed to serve professional investors and maintain high levels of investor protection and security.
The proposal will also reportedly not change the existing scenario for platforms already operating under the security token regime. The news led some commentators on Twitter to conclude that Bitcoin’s honeymoon phase was “over.”