Hong Kong Aligns Crypto OTC Derivative Rules with European Standards

Hong Kong financial regulators have set new requirements for over-the-counter (OTC) crypto derivatives, aligning their approach with European Securities and Markets Authority (ESMA) standards. Key to the new rules is the adoption of Digital Token Identifiers (DTIs) for accurate asset identification.

On September 26, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) announced a framework to bring their reporting requirements in line with ESMA. This move follows responses to a consultation paper issued in March 2024. The use of DTIs for crypto derivatives reporting is scheduled to become mandatory on September 29, 2025.

The decision follows feedback from local stakeholders, who noted difficulties in categorizing OTC derivatives within traditional asset classes—such as interest rates, foreign exchange, credit, commodities, and equities. The enforcement of DTI-based reporting aims to address these concerns by offering a standardized method of identifying crypto-asset underliers.

In their announcement, the HKMA and SFC highlighted that ESMA has been utilizing DTIs for reporting since October 2023, and these identifiers have become critical for crypto asset service providers across Europe.

To ease the transition to DTIs, reporting entities may continue to use existing identifiers, such as the Unique Swap Identifier (USI) and Unique Trade ID (TID), until the full implementation date. The regulators also mentioned plans for cross-border collaboration with authorities in Singapore, Australia, and Japan to coordinate a seamless adoption of DTIs across the Asia-Pacific region.

Additionally, the Hong Kong Customs and Excise Department (C&ED) is in discussions with the SFC about new licensing regulations for OTC crypto services. Previously, the C&ED was the sole regulator of OTC services, but the SFC is now exploring a broader regulatory framework, including oversight of cryptocurrency custodians.

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