Hong Kong’s Securities and Futures Commission recently adjusted its rules and said that the “non-contravention period” for cryptocurrency trading platforms will expire on Saturday. On June 1, 2024, anyone who does business in Hong Kong without a license for a VATP will have committed a crime. This further demonstrates the SFC’s commitment to increasing oversight of crypto exchanges.
In the most recent guidelines provided by the SFC, all Virtual Asset Trading Platforms (VATPs) are expected to obtain a direct license from the SFC or apply and be deemed licensed under the AMLO. This decision is part of the more significant efforts to enhance the regulation oversight of cryptocurrency transactions in this area, which will ensure that all running platforms meet set financial security regulations.
The SFC has stated that operating an unauthorized VATP will be unlawful and attract serious legal consequences from June. The SFC also urges investors to only engage with VATPs approved by the Commission and those found on their website. This measure protects individuals from possible scams and financial risks associated with unregulated entities.
Further, the SFC noted that the current DTBS platforms are applying for licenses and that they have yet to obtain accreditation and meet operational policies, procedures, systems, and controls that are effective to the satisfaction of the SFC. It has only been possible upon graduation to work and seek full licensure to practice their profession.
It is reasonable to expect these platforms and their ultimate owners to adhere to all the rules, regulations, and licensing conditions the SFC sets. They are also encouraged not to solicit business or take on any new retail clients until they demonstrate full compliance and get licenses.
To ensure these requirements are met, the SFC plans to conduct physical access checks of the deemed-to-be-licensed VATP applicants in the coming months. These examinations will assess the adequacy of these platforms in protecting client assets and the extent to which they implement rigid know-your-client policies.
Although the SFC introduced the new regulations in the year to enable licensed entities to offer cryptocurrency services to retail clients, it has subsequently strengthened its regulations. This was first seen as an opportunity to help Hong Kong become one of the leading players in the cryptocurrency market. Nonetheless, only some firms have met the rigorous federal standards to be licensed.
The effect of this pending factor on the crypto market in the local area can already be seen today. Some of them, including Gate.io, which developed an independent brand known as Gate.HK, for the Hong Kong market, has withdrawn its license applications. Furthermore, earlier in the month, Finance Magnates reported that OKX HK would cease its operations by May 31, 2024, due to the company withdrawing its license application. This was among many companies that intended to venture into the local market by June 2023.
The SFC has remained unrelenting with the upcoming deadline set to disrupt the functioning of cryptocurrency trading platforms in Hong Kong. This means that only those Social Trading platforms that conform to specific regulatory rules will be able to meet this market. This major shift demonstrates Hong Kong’s commitment to establishing a safe and legal environment for cryptocurrencies, as per global tendencies towards a higher degree of clarity and safety for digital assets.
