Hong Kong Regulator to Deal with Some Crypto Exchanges Like Brokers
The Securities and Futures Fee (SFC) launched its place paper on digital asset exchanges Wednesday, saying a brand new licensing scheme that it stated will not be dissimilar from the one utilized to Hong Kong’s safety brokers and automatic buying and selling venues.
Underneath the brand new licensing situations, crypto exchanges can solely provide merchandise to “skilled traders” as outlined by the SFC. Corporations might also solely alter services or products following approval by the regulator and will need to have an current relationship with an impartial auditing agency, submitting annual reviews on alternate actions. Exchanges should additional file month-to-month reviews to the fee.
Any digital asset agency buying and selling no less than one safety token falls beneath the regulator’s purview. Purposes for peer-to-peer (P2P) exchanges – corresponding to decentralized exchanges (DEX) or non-custodial commerce platforms – won’t be reviewed by the SFC.
Sizzling wallets – crypto storage with reside connections to the web – might not maintain greater than 2 p.c of an alternate’s complete funds. Whereas exchanges are mandated to have insurance coverage for all belongings within the occasion of a breach or hack, the SFC states.
Anti-money laundering (AML) and know-your-customer (KYC) procedures are cited as a chief concern, with the SFC saying exchanges should take steps to “set up the true and full id of every of its shoppers, and of every shopper’s monetary state of affairs, funding expertise and funding aims.”
Upon the granting of a license, corporations enter into the SFC Regulatory Sandbox which the regulator says brings extra exacting reporting and monitoring requirements.
The regulator additionally issued a warning Wednesday to suppliers of cryptocurrency-based futures merchandise concentrating on Hong Kong residents with out the correct paperwork. The SFC stated it “has not licensed or authorised any individual in Hong Kong to supply or commerce digital asset futures contracts” thus far and stays “unlikely to grant a licence or authorisation to hold on a enterprise in such contracts.”
Crypto spinoff suppliers like BitMEX and OKEx already prohibit entry to their merchandise in Hong Kong.
Handed in November 2018 and up to date this October, the SFC’s first crypto licensing scheme, regarding funds that make investments 10 p.c or extra of their portfolios in crypto, has solely given the inexperienced gentle to at least one fund up to now yr.
Hong Kong picture through Shutterstock