Hong Kong Government Proposal on Licensing Crypto Firms Ends Consultation Period

The government plans to introduce licensing for virtual asset service providers.

AccessTimeIconMay 21, 2021 at 11:13 a.m. UTC
Updated Sep 14, 2021 at 12:59 p.m. UTC

As part of a move to tighten anti-money laundering regulations, the Hong Kong government is moving to license virtual asset service providers (VASP) via a legislative proposal that has now moved past its consultation period.

  • The Securities and Futures Commission (SFC) would be provided with "necessary intervention powers" to impose restrictions or even prohibitions on companies providing crypto services, according to an announcement Friday.
  • The proposal would bring the SFC more powers to protect clients against potential misconduct from VASPs.
  • It would also restrict VASPs to serving only professional investors, according to CoinDesk's earlier reporting.
  • Such firms would be regulated under the measure regardless of whether they offer access to tokens considered to be securities or solely cryptocurrencies like bitcoin.
  • The announcement today forms the conclusion of a consultation process that ran from November 2020 to the end of January 2021.
  • Hong Kong is aiming to align with anti-money-laundering guidance from the Financial Action Task Force (FATF) with the legislation.
  • This news comes soon after self-regulatory organizations in China reiterated their stance on banning crypto services on May 18.
  • The National Internet Finance Association, the China Banking Association and the Payment and Clearing Association of China published a note confirming bans originally implemented in 2013 and 2017 that bar any services related to cryptocurrency transactions.

Update (12:00 UTC, May 21, 2021): Adds details of government announcement and context.

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