Hong Kong Plans to Introduce Crypto Platform Licensing Through a New AML Law

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Countries around the world are changing laws to introduce crypto regulation for the masses. It’s a market with untapped potential even though Bitcoin hasn’t had a lot of success this year. Many have already adopted crypto as legal tender, while other countries are looking to regulate the crypto space in general. It could be the beginning of something entirely new, and Hong Kong is the latest on that list.

China’s special administrative region has drafted a new amendment that aims to regulate the crypto space. More specifically, it should introduce licensing for virtual asset service providers (crypto exchanges) and registration for dealers. The goal of this new amendment is to implement counter-terrorist financing obligations and ALM (anti-money laundering) policies that will keep the crypto market in Hong Kong clean as a whistle.

Trading Platforms Would Need a License

When the new amendment gets its approval, all entities working with cryptocurrencies in the region would need a license to operate. It will be issued by the Hong Kong Securities and Futures Commission and must pass through a filter of requirements. The proposal was built upon recommendations from the Financial Action Task Force on Money Laundering that sets the standards in this area.

Currently, there is no law at directing cryptocurrencies in Hong Kong. That might all change soon. The so-called Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 was published in the government gazette in June, and only needs approval in two readings to become law.

As mentioned earlier, any entity that would like to deal with cryptocurrencies in Hong Kong must seek and obtain a license. The requirements are strict, mirroring those that apply to traditional financial organizations. Any entity would have to meet similar requirements as fiat money exchanges, but they would operate legally on Hong Kong’s territory.

The law will recognize VASPs as peer organizations in the financial sector. The SFC will also ensure that they adopt proper listing and trading policies and financial reporting. Disclosure procedures will also be implemented.

Paying Special Attention to the Threats in Crypto Space

The authorities have said that they’re very concerned with all the threats and insecurities that arise from trading cryptocurrencies. They want to protect investors from any vulnerabilities. So far, Bitcoin and cryptocurrencies are booming in Hong Kong. It’s not just offshore exchanges taken into question. Bitcoin gambling online has become a hit in China’s special administrative region, and the government simply wants to protect investors.

The new amendment comes at a tumultuous time in the Hong Kong cryptocurrency market. Earlier in June, a trio of Hong Kong-based crypto platforms have suspended client withdrawals. This happened right in the middle of a global sell-off that has sent Bitcoin’s price tumbling.

Cryptocurrencies were sent in a plunge not a couple of months ago when Terra’s Luna coin crashed. This was followed by fresh calls for regulation and raised questions about the value of cryptocurrencies in general. Many countries have come up with new crypto laws in its wake, and it seems that Hong Kong is the next on the list.

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Author: Harper James