Hong Kong has garnered attention in the crypto industry. Significantly, on June 1, the city implemented new crypto regulations. Wu Blockchain translated and published an explanation of the Hong Kong crypto regulations and the article sheds light on the implications of these regulations for crypto companies in Hong Kong. So, let’s take a look at what all this means.
TL;DR:
- Hong Kong has implemented new crypto regulations, requiring exchanges to obtain licenses from the SFC.
- Existing exchanges have a one-year grace period to align with the new regulations or withdraw from the market.
- The SFC will grant operational approval to companies demonstrating “genuine operations and genuine business practices” on non-securities trading platforms.
Grace Period for Existing Exchanges: Align or Withdraw?
Hong Kong Crypto Regulations: License Required for Exchanges in the City
Firstly, under the new regulations, cryptocurrency exchanges must obtain licenses from the Hong Kong Securities and Futures Commission (SFC). The SFC has initiated the review process for license applications. However, they are granting a one-year grace period to existing crypto exchanges with substantial operations in Hong Kong. During this grace period, these exchanges can either align their operations with the new regulations or choose to withdraw from the market.
Furthermore, the SFC will grant operational approval only to companies that demonstrate “genuine operations and genuine business practices.” This allowance applies exclusively to non-securities trading platforms.
In addition, the SFC outlines several criteria to determine whether an exchange has genuine operations and practices. They consider factors such as being based in Hong Kong, having personnel managing the crypto platform in the city, or maintaining a physical office in Hong Kong.
Moreover, the SFC defines operations in Hong Kong based on whether the exchange is actively marketing to the Hong Kong public. If an exchange promotes its services to the Hong Kong public, regardless of its place of incorporation, it must obtain a license.
The regulations also emphasize the need for “regulated individuals” to oversee these crypto platforms. Regulated individuals can include directors, responsible officers, and managers.
Lastly, these individuals will undergo a comprehensive “fit and proper” assessment by the SFC. Here, they must demonstrate their professional experience, regardless of whether it was acquired in Hong Kong or another jurisdiction.
