Hong Kong Crypto Rules Explained
By Kapil Rajyaguru
Asia’s financial hub Hong Kong is well-positioned to emerge as new center of the global cryptocurrency system following a crackdown on companies in the United States.
The US Securities and Exchange Commission (SEC) has levied fines and other penalties against crypto-lending firms, while bank officials have issued policy statements that amount to making it tough for crypto firms to access credit.
In an effort to position itself as a crypto hub, Hong Kong kicked off its Virtual Asset Trading Platform (VATP) handbook at the start of June 2023.
The Securities and Futures Commission (SFC) has provided the guidelines for cryptocurrency companies that wish to operate in the country, and will oversee all licensing.
First points is – Transitional Arrangements for Trading Platforms.
Well, the idea behind “transitional agreements” is to offer a one-year trial period for crypto firms that operate in the country. The companies can then apply for a business license in 2024, if they check all the boxes.
Second points is titled – Genuine Operations and Genuine Business Practices
What it entails basically that companies will be allowed to operate if the SFC has determined them to have “genuine operations and genuine business practices.” The document noted that this applies only to non-securities trading platforms.
What constitutes genuine operations and genuine practices? The SFC has determined several factors, including: whether the platform is based in Hong Kong, if it is controlled and operated by employees based in the city, if it has an office in there, and a number of other requirements.
Moving on to third point which is about passing a “Fit and Proper” test.
Well, Hong Kong’s guidelines look to put more responsibility on operators, or the individuals that are running cryptocurrency exchanges. It establishes the presence of “regulated individuals” such as directors, responsible officers and managers.
These individuals, according to the newly approved rules and regulations, will need to pass a “fit and proper” test. This will require crypto firm officers to prove relevant experience in regulated environments, even if that experience is in other countries.
Moving on to the final and fourth point which is about “marketing”
The new rules and regulations state that companies “actively marketing to Hong Kong residents,” come under purview of regulators.
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