Hong Kong’s Securities and Exchange Commission (SFC) will soon inspect crypto companies in the region ahead of the deadline for licenses to operate in the region. The regulator is shifting its focus to strengthening compliance criteria for crypto companies to protect the sector from exploitation and financial crime. The aim is to ensure that no company illegally offers services related to volatile crypto-assets that may expose Hong Kong citizens to financial fraud and other related risks.
Hong Kong deadline for crypto companies to get licenses looms
On 28 May, the SFC issued a formal notice to all virtual asset trading platforms (VATPs) operating in Hong Kong. As part of this notice, the SFC said, it will carry out checks on whether all crypto-functional crypto exchanges comply with the Anti-Money Laundering and Terrorist Financing Regulation (AMLO) priority. Because crypto transactions are largely anonymous, governments in several countries fear that these assets could be misused to finance illegal activities.
“All VATPs operating in Hong Kong must either be licensed by the SFC or VATP applicants who are “deemed licensed” under the AMLO. Administering VAT in Hong Kong in contravention of the AMLO is a criminal offence, and the SFC will take all appropriate action against any breach of the law,” the SFC said in its notice.
What lies ahead for crypto companies in Hong Kong
Data from digital currency payment platform Triplea.io estimates that more than 2.45 lakh people, or 3.27 percent of Hong Kong’s total population, currently own cryptocurrency. Meanwhile, Statista predicts that Hong Kong’s crypto market will grow by 8.58 percent by 2028.
In March, a total of 24 crypto companies, including Bybit, OKX and Crypto.com, approached Hong Kong regulators in hopes of securing operating licenses in the region.
Hong Kong follows India and the European Union (EU) in introducing mandatory regulations that crypto companies must adhere to.
Authorities in the region have imposed a deadline of June 1 for existing crypto companies to get their work with licenses and other documentation in order.
The Hong Kong regulator has also ordered the crypto community to deal with cryptocurrencies through officially licensed companies. The SFC maintains a list of approved companies.
“Investors are reminded that VAT applicants deemed licensed are NOT officially licensed by the SFC. While they have committed to improving their policies, procedures, systems and controls to comply with the SFC’s regulatory requirements, they still need to demonstrate the actual implementation and effectiveness of these measures to the SFC’s satisfaction,” the notice added.
The region is also taking pro-crypto measures to attract more companies from the sector to start operations. In April, Hong Kong followed the US in approving BTC and ETH ETFs.
