April 17, 2024
By Sharan Kaur Phillora
Hong Kong recently concluded its public consultation on April 12, aiming to establish a licensing system for providers of over-the-counter (OTC) trading services for virtual assets like Bitcoin and Ethereum. This move is part of Hong Kong’s broader strategy to enhance its regulatory framework for virtual assets under principles of “same activity, same risks, same regulation” as stated by the government in its Policy Statement on Development of Virtual Assets.
Here’s what we know:
During the consultation, industry stakeholders, including the Hong Kong Virtual Asset Industry Association, voiced concerns about restrictive measures on tradable currencies and rigorous customer due diligence requirements. The proposed system includes a transaction threshold of 8000 Hong Kong dollars and mandates the appointment of compliance and money laundering reporting officers.
These measures, intended to combat money laundering and financial terrorism, have sparked fears among small OTC businesses about potential cost pressures and loss of customers who may seek less regulated markets.
Additionally, there’s a discussion about whether to exempt popular stablecoins like USDT and USDC from trading restrictions. The limited number of approved cryptocurrencies for trading has raised worries about the potential migration of businesses to more accommodating regulatory environments. The impact of these regulations extends beyond local operations, influencing the broader market dynamics and the positioning of Hong Kong in the global virtual assets landscape.
The finalized guidelines from this consultation are expected to influence not only the market practices but also how Hong Kong is perceived as a virtual asset hub. Stakeholders are particularly keen on ensuring that the regulations do not drive consumers and businesses towards offshore providers, thereby undermining local market growth and security enhancements aimed at investor protection.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
