8th February 2024 – (Hong Kong) The government of Hong Kong has initiated a public consultation to gather feedback on proposed legislation that aims to establish a licensing regime for providers of over-the-counter (OTC) trading services for virtual assets (VA). The consultation period will span two months, running from 8th February to 12th April, 2024.
Following the Policy Statement on Development of Virtual Assets in Hong Kong, released in October 2022, the government expressed its commitment to enhance the regulatory framework for VA activities based on the principle of “same activity, same risks, same regulation.” As part of this commitment, a licensing regime for VA service providers was established under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) in June 2023, aimed at regulating the operations of VA trading platforms.
In light of fraudulent cases involving VA OTC operators, the government recognizes the necessity to regulate OTC services under the AMLO to address money laundering and terrorist financing risks (ML/TF) and safeguard the interests of investors. The key points of the proposed legislation include:
a. Mandating licensing by the Commissioner of Customs and Excise (CCE) for individuals conducting VA spot trade services for monetary transactions in Hong Kong.
b. Extending the scope of regulation to cover all VA OTC services, regardless of whether they are offered through physical outlets or other platforms.
c. Empowering the CCE to oversee the anti-money laundering and counter-terrorist financing activities of licensees and enforce statutory and regulatory requirements under the new regime.
d. Facilitating a transitional arrangement to ensure the smooth implementation of the regulatory regime.
A spokesperson for the government emphasized that these legislative proposals are crucial for establishing a robust and transparent regulatory environment that supports the sustainable development of VA and Web3 technologies. The proposed licensing regime for VA OTC service providers is expected to effectively mitigate ML/TF risks associated with VA activities and provide adequate investor protection.
The consultation document can be accessed on the Financial Services and the Treasury Bureau’s webpage at www.fstb.gov.hk/fsb/en/publication/consult/doc/VAOTC_consultation_paper_en.pdf.