Hong Kong’s Securities and Futures Commission calls for public feedback on its newly proposed licensing regime for cryptocurrency exchanges set to take effect from June 2023.
A key consideration of the public consultation window is whether to allow licensed exchanges to serve retail investors in the country and what measures should be implemented to provide a range of robust investor protection measures.
The SFC announced the consultation process on Feb. 20, outlining a new licensing regime for the industry which proposes that all centralized cryptocurrency trading platforms operating in Hong Kong must be licensed with the regulatory body.
The SFC’s proposed regulatory guidelines are based on existing requirements for licensed securities brokers and automated trading venues, while modifications have been made to some of the existing prerequisites.
A statement from SFC CEO Julia Leung highlighted the “recent turmoil” in the cryptocurrency ecosystem and the collapse of industry players like FTX as a primary reason for clear regulatory guidelines for the industry with investor protection top of mind.
According to the announcement, any person or business providing cryptocurrency-related services must apply for a license from the SFC. Furthermore, a number of requirements are set out for cryptocurrency exchanges and service providers.
This includes a host of prerequisites, including the safe custody of assets, Know Your Customer, conflicts of interest, cybersecurity, accounting and auditing, risk management, Anti-Money Laundering/counter-financing of terrorism and prevention of market misconduct.
Businesses that intend to continue operating and applying for a license are encouraged to review and revise existing systems and controls to meet the requirements of the upcoming regime. Exchanges and service providers that do not intend to apply for a license will have to prepare to close down their businesses in Hong Kong.
Hong Kong’s SFC also intends to publish and maintain a list of licensed cryptocurrency exchanges and service providers to inform the general public of the registration statuses of different firms.
