The crypto market in Hong Kong is being brought closer to a regulation process that is both tougher and clearer. Regulators are drafting a new law that will compel the licensing of virtual asset dealers and custodians.
The future law is part of a large-scale attempt to migrate the treatment of digital assets to that of traditional financial products. The regulators will be filling the legal vacuum while the market is provided with plain rules to abide by.
The proposal is a product of a collaboration between the Financial Services and the Treasury Bureau and the Securities and Futures Commission. The main target is to broaden the supervision over and above the crypto exchanges already licensed.
The law, if passed, will also apply to over-the-counter (OTC) trading desks, dealers, and virtual asset custodians, among others. The companies, which are involved in the transactions of digital assets, would not have to lie within a regulatory ambiguous area anymore.
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Instead, they would be accountable under the same framework that applies to the licensed trading platforms. The regulators argue that this would not only safeguard investors but also aid in the development of a more reliable and peaceful crypto market.
Hong Kong: Regulation of Dealers under Existing AML Law
The forthcoming licensing scheme for virtual asset dealers will be grounded in Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The scheme will mimic the existing rules for Type 1 regulated activity, which is the buying and selling of securities, very closely.
In other words, crypto dealers will be in situations similar to those of traditional securities firms. They would have to comply with the governance, internal controls, and anti-money laundering standards. The regulators clarify that the goal is to maintain consistency, thus the regulation of digital assets would be determined by risks and activities rather than being a separate or exemption case.
