The Hong Kong government has initiated a public feedback process regarding proposed legislation to establish a licensing framework for over-the-counter (OTC) virtual asset (VA) trading service providers.
This move comes in response to evidence of VA OTC operators being implicated in fraudulent activities, highlighting the urgency for regulatory measures to be applied to OTC services under the Anti-Money Laundering and Counter-Terrorist Financing (AMLO) framework. The aim is to mitigate the risks associated with money laundering and the funding of terrorism.
Under the proposed regulations, any entity engaged in the business of offering spot trading of virtual assets for cash within Hong Kong will be required to obtain a license from the Commissioner of Customs and Excise (CCE). The proposal also seeks to extend regulatory oversight to encompass all VA OTC services, empowering the CCE to supervise the compliance of license holders with anti-money laundering and counter-terrorist financing mandates. Stakeholders are invited to submit their opinions and feedback during the two-month consultation period, concluding on April 12, 2024.
Moreover, in a recent update, the Hong Kong Securities and Futures Commission disclosed revisions to its policy concerning the sale of virtual currencies and associated regulatory prerequisites, prompted by market developments and industry feedback.
In line with the updated guidelines, virtual assets will now be classified as complex products, thereby subjecting them to the regulatory framework applicable to analogous financial instruments. The commission points to cryptocurrency exchange-traded funds (ETFs) and products launched outside of Hong Kong as instances of such complex products.