- Hong Kong is exploring a new approach to regulate OTC virtual asset trading, potentially involving the SFC in oversight duties.
- Proposed licensing frameworks for OTC and custodian services aim to enhance transparency and protection for crypto investors.
- The SFC, working with Hong Kong regulators, seeks to ensure a stable and consistent regulatory environment for virtual assets.
Hong Kong is developing a new tactic to supervise over-the-counter (OTC) virtual-asset trading, which could give the SFC one more job, according to Secretary for Commerce & Economic Development Edward Yau. The move is the latest part of the city’s attempts to tighten control and oversight over an increasingly volatile virtual asset area.
According to a recent report on Thursday, the SFC is currently soliciting feedback from the industry on a new potential OTC cryptocurrency services licensing framework. Sweeping new powers under the proposals would see these types of services regulated by a framework in which SFC will work together with Customs and Excise Department (C&ED). The movement of cryptocurrencies between two parties in large volumes done privately has been recognized as one more area that needed stronger scrutiny.
Hong Kong Expands Regulatory Oversight
On the back of a consultation paper released at the start of this year, it was anticipated that OTC services would become solely regulated by C&ED. Whatever the outcome, however, including the SFC in its regulatory measures would mean a much broader attempt from Hong Kong to make certain that companies involved in virtual currencies are far more open and investors afforded better protection.
Besides over-the-counter services, the SFC has also talked to industry players about setting up a licensing framework for cryptocurrency custodian services. Virtual asset storage, in particular custody services storing digital assets on behalf of clients or key management for qualified securities investments has become a critical part of the ecosystem. But they are in a regulatory grey zone with scant formal oversight.
A licensing system for custodian services would introduce additional security features as well, giving investors other shield and guard. And like the proposed OTC regs, discussions around custodian service licensing are similarly nascent and may evolve through feedback from the industry.
Hong Kong Backs Responsible Growth
An SFC spokesperson said the agency continues to back virtual asset growth but with responsibility. The spokesperson stressed the SFC collaborates closely with Hong Kong regulators and government to provide a predictable and consistent regulatory environment.
Should it be implemented, those new requirements could represent the latest step in a broader push to position Hong Kong as an international leader in virtual asset regulation. Yet another factor that is currently affecting the planned industrial revolution of Myanmar If not well regulated and controlled so to attract new investment in building a stronger foundation, banking on regulations can stabilise industries.
