•The Securities and Futures Commission (SFC) of Hong Kong has proposed a licensing system for cryptocurrency exchanges, which will take effect in June 2023.
•The consultation process is aimed at determining whether to permit regulated exchanges to service retail investors in the nation, and what steps should be taken to provide a variety of “strong investor protection measures”.
•Licensed cryptocurrency trading platforms must adhere to strict regulatory standards concerning investor protection, secure asset custody, Know Your Customer compliance and more.
Hong Kong Crypto License System
The Securities and Futures Commission (SFC) of Hong Kong is proposing a new licensing system for cryptocurrency exchanges that will go into effect in June 2023. During the public consultation session, the SFC is seeking input on whether to permit regulated exchanges to service retail investors in the nation, as well as what steps should be taken to provide investors with strong protection measures.
Requirements For Licensed Platforms
Each individual or company offering services related to cryptocurrencies must seek out a license from the SFC. Furthermore, companies must adhere to strict regulatory standards regarding secure asset custody, Know Your Customer compliance, conflicts of interest prevention, cybersecurity protocols, accounting/auditing practices and more.
Rationale Behind The New Licensing System
According to SFC CEO Julia Leung, the turmoil experienced by key players like FTX within the cryptocurrency ecosystem was one of the primary drivers behind this new licensing system: “As has been our philosophy since 2018,“ she said,“our proposed requirements for virtual asset trading platforms include robust measures to protect investors following the ’same business same risks same rules‘ principle.“
Public Consultation Process
The public consultation process marks an important step towards introducing comprehensive regulations for crypto services providers operating in Hong Kong. This period allows interested parties including members of the public and industry stakeholders alike to submit their feedback on how best they believe these regulations should be structured.
Given that this new licensing system is slated for implementation later this year it’s essential that all those affected are given sufficient time to review and restructured their systems accordingly so that they can comply with these new rules by June 2023.