VIRTUAL ASSET REGULATION BROACHED

The Government today launched a public consultation on legislative proposals to introduce a licensing regime for providers of over-the-counter (OTC) trading services of virtual assets (VA).

The proposals constitute an important element in the efforts to develop a robust and transparent regulatory environment for the sustainable development of VA and Web3, the Government said.

The legislative proposals require that any person who conducts a business in providing services of spot trade of any VA for money in Hong Kong must be licensed by the Commissioner of Customs & Excise (CCE).

Another salient point of the proposals requires covering all VA OTC services irrespective of whether the services are provided either through a physical outlet or other platforms.

Additionally, it is essential for the proposals to provide powers for the CCE to supervise the anti-money laundering and counter-terrorist financing conduct of licensees, and enforce the statutory and regulatory requirements under the new regime.

Furthermore, a transitional arrangement needs to be provided to facilitate the effective implementation of the regulatory regime.

In the Policy Statement on Development of Virtual Assets in Hong Kong issued in 2022, the Government stated its commitment to enhance the regulatory framework for VA activities under the "same activity, same risks, same regulation" principle.

In this respect, the licensing regime for VA service providers established under the Anti-Money Laundering & Counter-Terrorist Financing Ordinance started operation in June 2023 to regulate the operations of VA trading platforms.

As some of the fraud cases involve VA OTC operators, the Government stressed that there is a need to regulate OTC services under the ordinance to mitigate the money laundering and terrorist financing risks and protect investors.

The public consulation will last until April 12 and views on the proposals can be emailed to vaotc-consult@fstb.gov.hk or posted to the Financial Services & the Treasury Bureau at 24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar.

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