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In a significant move to strengthen its financial regulatory framework, the Hong Kong Government today launched a public consultation on a new licensing regime aimed at providers of over-the-counter (OTC) trading services for virtual assets (VAs). This initiative underscores the government's commitment to safeguarding the financial system against money laundering and terrorist financing risks associated with cryptocurrency transactions.
The consultation, which is open for submissions until April 12, 2024, marks a pivotal step in the government's ongoing efforts to establish a robust regulatory environment for the burgeoning virtual asset sector. The move follows the Policy Statement on Development of Virtual Assets issued in October 2022, wherein the government pledged to enhance the regulation of virtual asset activities based on the principle of "same activity, same risks, same regulation."
Crypto exchanges to face stricter regulations
Under the new proposals outlined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), any entity engaged in the business of providing spot trade services of any virtual asset for money in Hong Kong will be required to obtain a license from the Commissioner of Customs and Excise (CCE). The legislation aims to cover all aspects of VA OTC services, regardless of whether they are offered through physical outlets or online platforms.
One of the key features of the proposed licensing regime is the empowerment of the CCE to oversee the anti-money laundering and counter-terrorist financing conduct of licensees. This includes the authority to enforce statutory and regulatory requirements under the new regime, thereby ensuring a high standard of compliance among service providers.
The government also plans to introduce transitional arrangements to facilitate the smooth implementation of the regulatory framework. This approach is designed to allow existing operators time to adjust to the new requirements while ensuring continued protection for investors.
Overall, this move by the Hong Kong government is expected to play a critical role in establishing the city as a leading global hub for virtual asset trading and blockchain technology, aligning with international best practices and reinforcing investor confidence in the digital economy.
Yuri Molchan
Gamza Khanzadaev
Dan Burgin
Alex Dovbnya