Navigating Hong Kong’s New Crypto Laws

Hong Kong has been making headlines within the crypto house ever because it introduced it might permit retail crypto trading in Could 2023. On June 1, Hong Kong carried out new crypto rules to license exchanges, with the Hong Kong Securities and Futures Fee (SFC) marking the event by issuing a flurry of regulatory steering for operators of Digital Asset Buying and selling Platforms (VATP). You will need to word that whereas cryptocurrencies have confronted prohibition in mainland China since 2021, Hong Kong has its personal distinct monetary system and regulatory our bodies.

On June 13, a proof of those rules written by Gilbert Ng — founding father of consultancy agency Mura and practising lawyer within the Excessive Courtroom of the Hong Kong Particular Administrative Area — and Chris Lee — founder and associate of TKX capital — was translated and printed by Wu Blockchain.

What are these new rules, what do they imply, and the way will they have an effect on the rising variety of crypto firms wishing to relocate to Hong Kong as their operational base? We break all of it down.

SFC accepting functions from crypto exchanges

Cryptocurrency exchanges at the moment are mandated to acquire a license from the SFC to commerce and market to shoppers in Hong Kong. Because the SFC begins its evaluation of license functions, pre-existing exchanges with vital operations within the metropolis are granted a one-year grace interval. Throughout this time, they’ll both align their operations with the brand new rules or determine to withdraw from the market.

A inexperienced mild for operations will likely be granted by the SFC solely to firms demonstrating “real operations and real enterprise practices.” This allowance is unique to non-securities buying and selling platforms.

What are “real operations and real enterprise practices?”

What do real operations and practices entail? The SFC supplies a number of determinants, together with whether or not the platform relies in Hong Kong, whether it is managed by personnel located within the metropolis, or if it maintains a bodily workplace there, amongst others.

In response to the interpretation from Wu Blockchain, The SFC defines operations in Hong Kong primarily based on whether or not the alternate is “actively advertising and marketing to the Hong Kong public.” If an alternate, no matter its place of incorporation, promotes its companies to the Hong Kong public, it should acquire a license.

This may embrace varied actions comparable to common contact with Hong Kong traders or the general public, promoting companies to the Hong Kong public via mass media campaigns focused at Hong Kong traders, and fascinating in web actions concentrating on Hong Kong traders. 

Regulated people

The necessities additionally emphasised a necessity for personnel, named “regulated people,” to helm these crypto platforms. For instance, the people could be a cohort comprising administrators, accountable officers, and managers.

These regulated people will likely be put via a rigorous “match and correct” evaluation from the SFC, the place they might want to show their skilled expertise, no matter whether or not that have is in Hong Kong or one other jurisdiction.

For those who plan on registering or making use of, learn the total phrases for the license in SFC’s official handbook. The evolving panorama of cryptocurrency regulation, notably in monetary hotspots like Hong Kong, is a testomony to the rising relevance and acceptance of digital belongings worldwide. As Hong Kong diverges from mainland China’s hardline stance on cryptocurrencies, it alerts town’s dedication to determine itself as a worldwide chief on this sector.