The Securities and Futures Commission (SFC) of Hong Kong has requested public input on its recently proposed licensing framework for cryptocurrency exchanges, which is scheduled to become operational in June 2023. The public has until March 31st to weigh in on the new framework.
Crypto Exchanges Mandated To Obtain Licence From The SFC
On February 20th, the SFC unveiled the consultation procedure for its fresh licensing system for the cryptocurrency sector. The proposed regime mandates that any centralized digital asset trading platform conducting business in Hong Kong must obtain a license from the regulatory entity.
Julia Leung, the CEO of the SFC, emphasized the importance of establishing clear guidelines for the cryptocurrency industry. The CEO cited the “recent turmoil” within the ecosystem and the downfall of major industry players, such as FTX.
Meanwhile, the new crypto framework stipulated other requirements for crypto firms and exchanges. This includes prerequisites such as AML/CFT requirements, Know Your Customer, risk management, safe custody, auditing and accounting, cybersecurity, and conflicts of interest.
The SFC declared that every cryptocurrency trading platform in Hong Kong must receive approval from the regulatory body by June 2024. The agency threatened to close down all crypto platforms that refused to comply.
Hong Kong’s regulatory body also proposed easing the regulations prohibiting retail investors from purchasing crypto tokens from licensed platforms. The prohibition sparked discussions among the city’s lawmakers in 2022
Legislators had urged the regulator to consider revising the rules. The aim was to stop investors from turning to unregulated offshore platforms, such as FTX, to conduct their trades.
Meanwhile, Justin Sun, a Huobi advisor and founder of TRON, has confirmed that the Huobi cryptocurrency exchange will establish a new platform to seek a license from the SFC.
Hong Kong Is Becoming A Crypto Hub
The country’s officials and the government have been working to position Hong Kong as a financial hub for crypto. Hence, they have been behind the recent modifications to the country’s crypto licensing regulations.
As a testament to Hong Kong’s commitment to promoting sustainable investments, the city’s central bank issued the first tokenized green bond in the world last week. The city raised approximately $100 million to fund initiatives focused on green power and other related industries.
Also, the SFC announced on February 20th its efforts to achieve a more optimal equilibrium between safeguarding investors and promoting the market growth. In addition, the regulator proposed that retail traders will have access to only major tokens.
The consultation addressed the requirements for token admission and specified that these tokens are those with large market capitalization. Furthermore, these tokens must satisfy specific market criteria from two or more independent index providers.