Regulation
Hong Kong to inspect crypto exchange offices
Hong Kong’s Securities and Futures Commission (SFC) recently announced that it will conduct on-site inspections of crypto platforms applying for a license. The watchdog stressed that the 18 applicants “deemed to be licensed” would have to undergo the review for their applications to be approved.
SFC announces crypto inspection
Tuesday, the SFC revealed that it would inspect platforms applying to become Hong Kong-licensed Virtual Asset Trading Platforms (VATPs). The review will take place in the coming months while VATP candidates deemed approved continue their applications.
The on-site inspection will focus on crypto platforms’ protection of customer assets and know-your-customer (KYC) processes to determine the company’s compliance with SFC regulatory requirements.
Excerpt of the SFC’s announcement. Source: SFC
The results of the inspection “will feed into the licensing application process,” which requires VATPs and their owners to comply with all applicable laws and regulations. According to the announcement, any violation or failure to comply with key regulatory requirements will result in denial of the license.
Additionally, failing to meet investors’ expectations protective rules during the inspection could lead the SFC to take further regulatory action against crypto platforms if it deems them necessary.
The regulator also reminded applicants that they must comply with all SFC regulatory requirements and licensing conditions during the application process. These conditions include prohibiting mainland Chinese residents from accessing services related to the platforms’ virtual assets, marketing their services or onboarding retail users.
The SFC does not expect these applicants to actively market their services or onboard new retail clients until they have demonstrated actual implementation and effectiveness of their policies, procedures, systems and controls to the satisfaction of the SFC and having obtained an official license.
The non-contract period ends this week
In its press release, the SFC stressed that the key deadline was approaching. Hong Kong’s watchdog has reminded crypto platforms that the non-convention period for VATPs operating in the jurisdiction ends on June 1, 2024.
As reported Per Bitcoinist, the SFC has issued a new regulatory directive requiring all VATPs operating in Hong Kong to submit a license application by February 29. After the deadline, crypto platforms that did not apply for a license had a non-convention period under the Anti-Money Laundering and Counter-Terrorism Financing Ordinance (AMLO).
However, by June 1, all VATPs remaining in the area must be approved or “deemed approved” VATP candidates under the AMLO. Businesses that continue to operate after the designated period will face legal action:
Operating a VATP in Hong Kong in violation of the AMLO constitutes a criminal offense, and the SFC will take all appropriate action against any violation of the law.
As the end of the non-convention period approaches, Hong Kong’s regulator has urged investors in the region to trade virtual assets only on SFC-licensed platforms. Additionally, Hong Kong investors were reminded that VATP applicants are not officially approved despite steps taken to comply with the SFC.
As of this writing, only HashKey Exchange and OSL Exchange are approved VATPs operating in the region. The 18 other VATPs are awaiting the SFC’s decision on their authorization requests.
Total crypto market capitalization is at $2.5 trillion in the three-day chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com