Crypto exchanges and start-ups are welcoming the move of Hong Kong to introduce its mandatory licensing for every virtual asset service provider. Their step also includes the jailing of rogue players. It is saying that this proposal will deter the non-compliant players and will reduce the competition.
The Financial Services of this city, along with the Treasury Bureau, published its conclusion regarding the legislative proposals. It is about enhancing the anti-money laundering of the city with counter-terrorist regulation for finance. This verdict is following two months of consultation, which was launched in November.
As the government is affirming its position of subjecting the crypto exchanges to fulfill the licensing requirement for the SFC, it is also adding other details on the steps to how it can enforce the implementation of the regime. It is hoping to introduce the amendment bill in the city’s legislature in the 2021-22 session.
It came with the proposal of imposing a HK$5 million fine and seven years of imprisonment as a deterrent against illegal activities. Those who are going against AML and counter-terrorist financing will face a fine and two years of prison.
The conclusion has come after the price drop of bitcoin by 40% from its peak. Beijing is battering the oldest crypto with its resolve to clamp down on the trading and mining of cryptocurrencies.
The licensing regime is underlining how the city is taking a different regulatory approach from mainland China in its bid to balance the protection of investors against innovation. At least a dozen exchanges have their offices in the city.
The criminal sanction means the fact that the business case for facilitating trading in exchange services has become clear.
According to Lennix Lai, the director of financial markets at OKEX, “The new licensing regime will become more onerous for those that have been offering trading services that fall under the definition of regulated activities but without a license, to the Hong Kong retail public.”
OKEX does not do business with the Hong Kong people. Its office in the city supports the human resources of the firm. The exchange serves traders in 200 countries. OKEX is still studying its proposals. It is more inclined to apply for a license.
However, the operational record of OKEX in Hong Kong is not at all flawless. It is liquidating large bitcoins in the future position. The government also gave the confirmation that it is going to forbid the licensed platforms from servicing the investors.
In this regard, Kwan, the former director of supervision of markets and enforcement at the SFC, said, “The new mandatory regime would level the playing field for all players. More importantly, it ensures that all businesses that engage in virtual assets will know who their customers are, which is key in the fight against terrorist financing and money laundering crimes.”