Hong Kong to Submit Virtual Asset OTC Trading Licensing Scheme Bill
Luisa Crawford Feb 21, 2024 11:22
Hong Kong's Financial Secretary, Christopher Hui, plans to introduce a licensing scheme for virtual asset OTC trading platforms to combat crime and promote transparency in digital transactions.
Hong Kong Tightens Virtual Asset Oversight
Hong Kong's Financial Secretary, Christopher Hui, has addressed the Legislative Council with plans to fast-track the submission of a bill proposing a licensing scheme for over-the-counter (OTC) trading platforms dealing in virtual assets. This move aims to enhance the regulatory framework and transparency for virtual asset service providers.
The Securities and Futures Commission (SFC) had previously enhanced its information dissemination in September last year by publishing details on virtual asset trading platforms. This included the release of a "List of Suspicious Virtual Asset Trading Platforms" to provide the public with clear, transparent, and timely information. As of February 14 this year, 14 platforms have been listed.
The city has seen an uptick in virtual asset-related crime figures over the past three years, with recorded cases rising from 1,397 in 2021 to 2,336 in 2022, and reaching 3,415 in 2023. The associated monetary figures involved have also grown substantially, amounting to HK$8.24 billion in 2021, HK$17.04 billion in 2022, and HK$43.98 billion in 2023. The police currently consolidate arrest and prosecution data for specific cases, such as the JPEX case, in which 70 individuals have been arrested to date, with no prosecutions as of yet.
Furthermore, the SFC and the police exchanged intelligence on over 100 cases involving virtual asset trading platforms or related activities as of February 2. They determine the need for targeted investigations into complaints against individual platforms and activities based on a set of factors, including connections to Hong Kong, potential violations of relevant laws, and the scope and scale of the activities involved.
Public Consultation and Legislative Progress
In a push to refine the regulatory framework further, the Treasury Bureau initiated a public consultation on February 8 regarding the legislative proposal for establishing a licensing system for OTC virtual asset service providers. The consultation period extends until April 12. Additionally, a joint public consultation with the Hong Kong Monetary Authority concerning the regulation of stablecoin issuers was conducted in December last year, with feedback accepted until February 29.
Depending on the outcomes of these consultations and the progress of the preparatory work, the government will expedite the submission of the bill on the aforementioned licensing system to the Legislative Council.
Market Reaction and Future Outlook
The proposed regulatory changes and increased oversight could significantly impact Hong Kong's virtual asset market, aligning with global trends toward greater regulation in the cryptocurrency space. As the government prepares to introduce the bill, market participants may expect increased clarity and security in virtual asset transactions, potentially positioning Hong City as a leading regulated digital asset hub.
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