Hong Kong has commenced a new licensing regime for centralized virtual asset trading platforms (VATPs) operating in the country. Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), the new regime came into effect on June 1, 2023, and aims to enhance the regulatory oversight of virtual asset trading platforms and protect investors in the rapidly growing crypto industry.
Transitional Arrangements to the Licensing Regime
The Securities and Futures Commission (SFC) in Hong Kong announced transitional arrangements for the new licensing regime on May 31. Under the new regime, all centralized VATPs operating a virtual asset exchange (VA service) within Hong Kong or actively promoting their services to Hong Kong investors must seek a license from the (SFC).
To qualify for the transitional arrangements, a VATP must have already been offering VA services in the region before June 1, 2023. The SFC will evaluate whether a VATP is conducting a legitimate business with a genuine presence in Hong Kong based on specific factors.
The regulator stated that VATPs that are providing a VA service with a “meaningful and substantial presence” in Hong Kong before June 1, 2023, may continue to operate in the region from June 1, 2023, to May 31, 2024, without being in breach of the licensing requirements under the AMLO by virtue of the non-contravention arrangements.
VATPs that started operating after June 1 1, 2023, will not be eligible for the transitional arrangements. The SFC warned that these platforms should not conduct any VATP activities unless licensed by the SFC.
“The carrying on of any unlicensed activity is a criminal offence,” the regulator added.
No Provision for VATPs Offering Security Tokens
SFC stated in its announcement that the new arrangements do not apply to VATPs providing trading services in security tokens in Hong Kong.
“VATPs which intend to provide trading services in security tokens will be subject to the securities laws of Hong Kong and should commence their businesses in providing trading in security tokens only upon obtaining the relevant license under the Securities and Futures Ordinance (SFO),” SFC stated in the release.
Meanwhile, the regulator did not specify what it deems security tokens.
