Hong Kong may soon bolster its policing of the cryptocurrency sector to better conform with international anti-money laundering (AML) norms, Financial Secretary Paul Chan said in his annual budget speech Wednesday.
Promising that “detailed proposals” will come later this year, Chan said new regulations could target virtual asset service providers, or VASPs, the catchall term used by the Financial Action Task Force (FATF) in its latest “Travel Rule” guidance.
New regulations could raise the heat on crypto exchanges, over-the-counter desks and brokers in Hong Kong, a global crypto hub. Such entities are already monitored by the Hong Kong Monetary Authority (HKMA), which in December recommended that VASPs stay vigilant in self-regulating their customers’ goings on.
“[Authorized institutions] should keep abreast of international and local developments to maintain an up-to-date understanding of risks, and apply a risk-based approach that supports responsible financial innovation as well as effective ML/TF risk management,” HKMA’s AML enforcer, Carmen Chu, said at the time.
The prospect of government-mandated regulations comes months after the FATF, the global AML standards-setting watchdog, rated Hong Kong “largely compliant” with its recommendations around emerging technologies like cryptocurrency. But Hong Kong wants to further build out its anti-financial crimes framework, Chan’s speech shows.
Countries are clamoring to get ahead of FATF’s crypto guidelines. Some newcomers, such as Paraguay, have taken their first steps in regulating VASPs, while others have set up international partnerships to monitor cryptocurrency transactions.
At the same time, crypto firms themselves are angling to comply with the Travel Rule, which mandates that cryptocurrency exchanges and others share transaction information above certain thresholds. They have until June 2020 to work it out.