Hong Kong’s Securities and Futures Commission (SFC) will soon inspect crypto firms in the region ahead of a deadline to obtain licences to operate in the region. The regulator has been shifting its focus to strengthen compliance criteria for crypto firms in order to safeguard the sector against exploitation and financial crimes. The aim is to make sure that no firm is illegally offering services around volatile crypto assets which may expose the citizens of Hong Kong to financial fraud and other associated risks.
Hong Kong’s Looming Deadline for Crypto Firms to Gain Licences
The SFC released an official notice to all the virtual asset trading platforms (VATPs) operating within Hong Kong on May 28. As part of this notice, the SFC said, it will be conducting checks to see if all crypto functional crypto exchanges are adhering to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) on priority. Because crypto transactions are largely anonymous, governments of several countries fear these assets could be misused to fund unlawful activities.
“All VATPs operating in Hong Kong must be either licensed by the SFC, or “deemed-to-be-licensed” VATP applicants under the AMLO. It is a criminal offence to operate a VATP in Hong Kong in breach of the AMLO, and the SFC will take all appropriate actions against any breaches of the law,” the SFC stated in its notice.
What Lies Ahead for Crypto Firms in Hong Kong
Data from digital currency payment platform Triple-a.io estimates that over 2.45 lakh people, or 3.27 percent of Hong Kong’s total population, currently own cryptocurrency. Meanwhile, Statista, projects that the crypto market in Hong Kong is projected to grow by 8.58 percent by 2028.
In March, a total of 24 crypto firms including Bybit, OKX, and Crypto.com reached out to Hong Kong regulators hoping to secure operational licences in the region.
Hong Kong is following India and the European Union (EU) in deploying mandatory regulations that crypto firms must abide by.
The authorities in the region had imposed a deadline up till June 1 for existing crypto firms to get their licencing and other documentation work in order.
Hong Kong’s regulator has also instructed the crypto community to engage with cryptocurrencies via officially licenced firms. The SFC is maintaining a list of firms that are approved.
“Investors are reminded that deemed-to-be-licensed VATP applicants are NOT formally licensed by the SFC. While they have undertaken to enhance their policies, procedures, systems and controls to comply with the SFC’s regulatory requirements, they still need to demonstrate the actual implementation and effectiveness of these measures to the SFC’s satisfaction,” its notice added.
The region is also taking pro-crypto measures to attract more companies from the sector to begin operations. In April, Hong Kong followed the US to approve BTC and ETH ETFs.