Hong Kong lawmakers have proposed introducing mandatory licensing for virtual asset service providers, who will only be able to work with qualified investors.
The Hong Kong government has published a discussion paper proposing to tighten regulation of the cryptocurrency industry to combat money laundering and terrorist financing. Given the growing interest of the public in digital currencies, they may pose an increased risk of money laundering due to decentralization and confidential nature, according to local authorities. Hong Kong’s laws regarding digital assets are not clear enough, and this situation is going to be corrected by the government through amendments to the law, introducing a special licensing regime.
It will apply to all Virtual Asset Service Providers (VASPs) registered in Hong Kong offering any VA service. The paper describes a virtual asset as a digital asset used as a unit of account or store of value; used by the public to pay for goods or services, to pay off debt, or for investment purposes; an asset that can be transferred, traded, or stored electronically.
According to the document, any VASP is required to appoint at least two employees who will deal with issues related to compliance with the requirements for obtaining a license. VASPs must have sufficient financial resources, have the necessary knowledge and experience to conduct business, and implement risk management procedures. In addition, they are required to put in place mechanisms to prevent market manipulation and dishonest practices. These requirements must be met in order to comply with the Financial Action Task Force (FATF) rules.
Virtual asset service providers will be under the control of the Hong Kong Securities and Futures Commission. If the proposed bill is approved, VASP will have 180 days to apply for a license.
Recently, Hong Kong regulators banned unqualified investors from investing in cryptocurrency spot ETFs, and at the beginning of the year, the Hong Kong Monetary Authority (HKMA) announced its intention to strengthen the regulation of cryptocurrencies, reflecting this in legislation.
Source: Bits
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