Hong Kong Securities Regulator to Issue Cryptocurrency Exchange Licensing Guidelines in May

Hong Kong's Securities Futures Commission (SFC) to release cryptocurrency exchange licensing guidelines in May, supporting crypto trading platforms.

Hong Kong’s Securities Futures Commission (SFC) is set to release its cryptocurrency exchange licensing guidelines next month. The plans were revealed by the SFC’s Chief Executive Julia Leung on Thursday, who stated that the guidelines will provide support to crypto trading platforms that will be able to offer trading services to retail investors starting June 1.

The consultation process on the licensing regime received over 150 responses from interested parties, according to Bloomberg. This includes considerations on Anti-Money Laundering (AML) and Know Your Client (KYC) regulatory requirements, as outlined in the Feb. 20 report.

The guidelines will be a welcome development for the cryptocurrency industry in Hong Kong, as it seeks to establish itself as the next crypto hub. While some trading platforms have already received licenses from the SFC and have begun offering crypto-related services to investors, the new guidelines will provide clarity and transparency for other platforms seeking to operate within the regulatory framework.

OSL and Hashkey Group are amongst the few trading platforms to have already received licenses from the SFC, according to Reuters. However, not every trading platform has chosen to stick around for the long haul. Bitget, a crypto exchange with $1.4 trillion assets in reserve, announced on April 24 that it will cease offering services to its Hong Kong customers when the Hong Kong VASP regime takes effect on June 1.

The move by the SFC to release its cryptocurrency exchange licensing guidelines is a positive development for the industry in Hong Kong, as it will provide a clear regulatory framework for trading platforms to operate within. The guidelines will also help to promote investor confidence in the industry, as it will provide assurance that trading platforms are operating within the legal framework.

The SFC has been active in regulating the cryptocurrency industry in Hong Kong. In November 2019, the SFC issued a position paper on the regulation of virtual asset trading platforms. The paper outlined a regulatory framework for virtual asset trading platforms operating in Hong Kong.

The framework required virtual asset trading platforms to apply for a license from the SFC, and to comply with AML and KYC requirements. The SFC also outlined requirements for custody arrangements, asset segregation, and disclosure of risks to investors.

In October 2020, the SFC issued a statement warning investors about the risks of investing in virtual assets. The statement highlighted the high volatility of virtual assets, the lack of regulation, and the risk of fraud and hacking.

The SFC has been actively working to promote the development of the fintech industry in Hong Kong, and the regulation of virtual assets is an important part of this effort. The guidelines to be released next month will provide further clarity and transparency for the cryptocurrency industry in Hong Kong, and will help to promote investor confidence in the industry.

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