Hong Kong is contemplating modifications to its cryptocurrency regulatory framework, notably regarding over-the-counter (OTC) digital asset buying and selling providers.
The Securities and Futures Fee (SFC) might play a bigger position in overseeing the sector, working alongside the Customs and Excise Division (C&ED), in response to a current report from the South China Morning Put up.
Hong Crypto OTC To Be Regulated
Notably, the proposed modifications would shift from the present system, the place the C&ED primarily handles OTC providers. For context, OTC providers facilitate direct, personal cryptocurrency transactions between giant events, bypassing the necessity for a public alternate.
South China Morning Put up reported that the SFC’s potential involvement in regulating OTC providers would align it with its broader obligations over the monetary markets, probably offering extra readability for the crypto trade.
Citing unnamed sources acquainted with the discussions, the report additional disclosed that the SFC has consulted with trade gamers on this new licensing regime.
The SFC and the C&ED collaboration could be a key a part of these regulatory developments, addressing issues concerning the separation of obligations between the 2 entities.
Along with OTC buying and selling providers, the SFC can be exploring introducing a licensing regime for cryptocurrency custodian providers, a important aspect of the market’s infrastructure.
Why The Regulation On OTC?
Hong Kong’s strategy to cryptocurrency regulation follows the numerous monetary losses and rising issues over fraud within the sector.
Based on the report, the collapse of JPEX, particularly, has pushed authorities to look nearer on the position of OTC providers, which have turn into “primary avenues for channeling retail buyers’ funds” into illicit schemes.
The report highlighted additional that these providers typically function by way of “bodily outlets”, lots of which have been tied to fraudulent actions, highlighting the necessity for extra “stringent oversight.”
In response to the rising dangers, an SFC consultant famous:
To foster the sustainable and accountable growth of the digital belongings trade in Hong Kong, the SFC works intently with the federal government and different regulators in creating a sturdy, clear and constant regulatory surroundings in Hong Kong
Nonetheless, regardless of the appreciable justification for regulating the OTC crypto sector within the area, the report talked about that people are nonetheless nervous about how the regulation will work, noting:
Some within the trade complained that placing all OTC outlets beneath the C&ED, which regulates cash changers, was inflicting confusion provided that the SFC regulates different areas of crypto funding.
Regardless, the Monetary Companies and the Treasury Bureau (FSTB), which initially sought public suggestions on the OTC laws over a two-month session interval famous that the proposal obtained “normal assist from respondents.”
Moreover, though the total outcomes of the session are but to be launched, the FTB disclosed that the bureau is now reviewing the design of the regulatory framework primarily based on the suggestions supplied.
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