New laws tailored to regulate the crypto space in Hong Kong aim to implement a licensing regime for crypto service providers. Each change to the region’s anti-money laundering (AML) rules was submitted to its legislature while a recently issued report examines the threats involved.
Hong Kong lawmakers to consider a bill to align the crypto sector with the financial industry
Amendments designed to govern Hong Kong’s cryptocurrency market have been submitted to members of the Legislative Assembly of the Special Administrative Region of China: the Anti-Money Laundering and Anti-Terrorist Financing (Amendment) Bill 2022, published in the Official Gazette in June, requires their approval on second reading to become law It is.
The authors of the draft seek to introduce licensing of virtual asset service providers (VASPs) and registration of dealers in precious metals and stones (DPMS). The aim is to impose anti-money laundering and counter-terrorist financing obligations on companies operating in these two sectors.
For example, businesses dealing in cryptocurrencies that wish to launch a trading platform would have to obtain a license from the Securities and Futures Commission (SFC) of Hong Kong and meet a number of requirements. This proposal takes into account the recommendations of the Financial Action Task Force on Money Laundering (FATF), which sets global standards in this area.
The new requirements for VASP are equivalent to those that apply to traditional institutions in the financial services sector, and they must meet similar financial adequacy requirements, said Asia-Pacific managing director of crypto exchange Bitstamp Andrew Leelarthaepin noted in an article published by the South China Morning Post. In his opinion, it recognizes crypto companies as a component of Hong Kong’s financial system. The executive elaborated.
Simply put, VASPs can expect to be regulated by the same standards as our institutional clients. By law, VASPs are recognized as peers in the financial services sector.
Under the upcoming law, the SFC will also be responsible for ensuring that virtual asset service providers adopt appropriate listing and trading policies and financial reporting and disclosure procedures. The Commission will also observe the implementation of mechanisms designed to prevent market manipulation and conflicts of interest.
As legislators prepare to approve a new regulatory framework, the latest edition of Hong Kong’s Money Laundering and Terrorist Financing Risk Assessment Reportpays particular attention to threats and vulnerabilities in the crypto space. While acknowledging the growing potential and popularity of virtual assets, the document highlights their vulnerability to various risks and the challenges they pose to investor protection.
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