Can Hong Kong Become a Crypto Hub Following Regulatory Changes?

Hong Kong-based regulator Securities and Futures Commission (SFC) has launched new consultations on newly proposed requirements for operators of crypto-asset trading platforms.

In this consultation, the SFC appears to take a view on whether licensed virtual asset platform operators should be allowed to offer services to retail investors in Hong Kong. The SFC is also considering what steps should be taken to ensure investor protection.

as part of New licensing system After June 1, 2023, any individual or organization looking to provide virtual asset services (including operating a virtual asset exchange) must apply and obtain a license from the SFC before doing so.

Julia Leon, CEO, Securities and Futures Commission

Julia LeonSFC Chief Executive Officer explained the timing of the new proposal. Mr Leung said:

“In light of the recent turmoil and the collapse of several major crypto trading platforms around the world, we are working to ensure that investors are adequately protected and that key risks are effectively managed. There is clear consensus among regulators around the world on the regulation of

The Securities and Futures Commission has set a March 31, 2023 input filing deadline.

Hong Kong’s Proposed Regulations on Virtual Assets

SFC proposed to implement the following rules to ensure the safety of customer assets.

  • Hong Kong regulators have proposed that virtual asset trading platforms hold all customer money and virtual assets through wholly-owned subsidiaries.
  • If the proposal is implemented, the platform should ensure that no more than 2% of the client’s virtual assets are stored in a “hot wallet”. The term refers to a wallet that is not connected to a web server and initiates financial transactions, including cryptocurrencies, via a browser-based web page. “Hot wallets” are highly vulnerable to cyberattacks because all public and private keys are stored on the Internet.
  • Since much of the secure storage of virtual assets comes down to storing private keys, all platform operations must implement internal policies and governance procedures for private key management. The platform securely generates, stores and backs up all cryptographic seeds and keys.
  • The new procedures ensure that platform operators do not deposit, transfer, lend, pledge, repledge or trade clients’ virtual assets.
  • Operators are also required to maintain insurance policies to cover all risks associated with the custody of virtual assets.
  • KYC checks also form an important part of regulatory changes, ensuring clients are well-informed about their virtual assets. This mainly covers the client’s knowledge of the risks before the platform provides services to the client.
Hong Kong: Cryptohub?

The move is good news for many in Hong Kong, who currently have to deal with unlicensed exchanges to invest and trade in cryptocurrencies.

Paul Chan
Paul Chan, Hong Kong Finance Secretary

Regulatory news comes from Hong Kong’s Finance Minister, Paul Chan, explained that the region continues to develop its cryptocurrency infrastructure. Despite the collapse of FTXHong Kong continues to try to pull crypto firms into its powers.

Hong Kong may have focused its efforts to catch up with Singapore, which has continued to push cryptocurrencies.But recent history has not been kind to the nation’s crypto space.Singapore’s State-owned Investment Fund Temasek Hundreds of millions of dollars invested before the FTX exchange collapsed.

Lawrence WongSingapore’s Deputy Prime Minister explained in November 2022 that the loss had caused reputational damage.An ideal opportunity for Hong Kong to catch up as Singapore struggles to rebuild confidence in the sector. may become.

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