Hong Kong Government to Tighten Regulations on Over-The-Counter Virtual Asset Trading
Summary:
Hong Kong's government is planning to increase the regulation of the over-the-counter (OTC) virtual asset trading, proposing to bring it under the oversight of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) from June 2023. The proposal covers spot trade of any virtual assets for any money, while the general virtual asset trade remains under a standard license. Traders will need to secure a license from the Commissioner of Customs and Excise and provide addresses of the local management office and record storage locations. These changes won't affect peer-to-peer trading and are part of a broader regulatory effort to include virtual asset service providers.
Hong Kong's administration is taking steps to increase the regulation of the informal, over-the-counter (OTC) virtual asset trades by subjecting them to the regulation enforced on regular virtual asset trades. This development unveiled on February 8, with the administration releasing a consultation paper that seeks to regulate the OTC virtual asset trades. The consultation will continue until April 12. The primary proposal in the paper involves bringing the OTC trade under the oversight of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), from June 2023 onwards. OTC transactions typically refer to direct trades between a provider and a customer without a centralized marketplace, such as an exchange. The administration's proposal covers only "spot trade of any virtual assets for any money" within the OTC category. However, the general virtual assets (VA) trade will continue to be under the purview of a standard virtual assets trade provider (VATP) license, and Peer-to-peer trading will remain outside OTC regulation. As per the government's data, there are approximately 200 VA OTC physical outlets (including ATMs) and approximately 250 digital platforms active in buying and selling VA services in Hong Kong. As per the upcoming regulation, OTC traders will have to meet the same requirements as all other virtual asset service providers. They will need to secure a license from the Commissioner of Customs and Excise (CCE) and provide the address of the local management office, correspondence address, and location for local book and record storage. Licensees will only be authorized to transfer the VA from their registered wallets to a client wallet, with clients required to provide ownership or control proof of their wallets. Moreover, OTC traders will be prohibited from trading virtual assets not listed on the retail VATPs or stablecoins not licensed by the Hong Kong Monetary Authority (HKMA). The financial services department of the Hong Kong government highlighted a deadline for unlicensed virtual asset service provider (VASP) applications on February 2, noting that those not approved should stop operations by May 31.
Published At
2/8/2024 1:50:00 PM
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