Hong Kong Launches Consultation on Regulatory Proposals for OTC Trading of Virtual Assets
Hong Kong’s local government has initiated a consultation to gather feedback on its regulatory proposals for over-the-counter (OTC) trading of virtual assets. The public consultation, which commenced on Thursday, focuses on implementing a licensing regime for providers of OTC trading services for virtual assets. The consultation period will run until April 12, 2024.
“The legislative proposals constitute an important element in the Government’s efforts to develop a robust and transparent regulatory environment for the sustainable development of virtual assets and Web3. The proposed licensing regime for virtual asset over-the-counter service providers will effectively mitigate the ML/TF risks of the virtual asset activities concerned and cater for investor protection,” a Hong Kong government spokesman stated.
The Legislative Proposals
The key aspects of the legislative proposals involve making it mandatory for any person conducting a business that provides services for the spot trade of any virtual asset in Hong Kong to obtain a license from Hong Kong’s Commissioner of Customs and Excise. The regulations cover all virtual asset over-the-counter services, regardless of whether they are offered through physical outlets or other platforms. Additionally, the regulatory framework suggests granting supervisory powers to the CCE to oversee anti-money laundering and counter-terrorist financing conduct of virtual asset licensees.
Fraudulent OTC Activity Detected
Last week, Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, highlighted in a blog post that certain OTC venues have been involved in fraud cases. To address this issue, Hui emphasized the necessity of regulating OTC venues and announced the forthcoming launch of a consultation on the proposed regulatory framework. In June 2023, Hong Kong implemented its crypto licensing regime for virtual asset trading platforms, with two platforms, HashKey and OSL, currently holding licenses. Existing operators in Hong Kong were given a transitional period to submit their license applications before the system took effect.
Hot Take: Hong Kong’s Consultation on OTC Trading Regulation
Hong Kong’s government is taking proactive steps to develop a robust regulatory environment for virtual asset trading. The ongoing consultation on regulatory proposals for over-the-counter (OTC) trading services demonstrates their commitment to addressing concerns such as fraud and investor protection. By mandating licensing for individuals conducting virtual asset spot trades and granting supervisory powers to oversee anti-money laundering measures, Hong Kong aims to mitigate risks associated with OTC activities. This move aligns with global efforts to establish transparent frameworks that foster the sustainable growth of digital assets. As the consultation progresses, industry stakeholders and the public have an opportunity to contribute their perspectives and shape the future of virtual asset trading in Hong Kong.
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