As Hong Kong seeks to become the burgeoning crypto hub in Asia, the regulators have stepped up to create a safe and secure environment for trading digital assets. On Monday, the Hong Kong Securities and Futures Commission (SFC) revealed plans to conduct on-site inspections of crypto asset service providers.
The inspection will assess whether the crypto firms comply with the new licensing requirement taking effect on June 1.
Hong Kong Adopt New Crypto Licensing Rules
After sending multiple reminders to the local crypto firms, the SFC expects all virtual assets service providers (VASPs) to complete the licensing requirements by June 1.
The SFC stated that there will be no deadline extension for applying for the new license. After June 1, the SFC expects the local VASPs to be licensed or deemed licensed.
The financial regulators explained that VASPs grouped as deemed to be licensed would require a regulatory assessment to obtain their Hong Kong license. The deemed-to-be licensed category comprises crypto exchanges operating in Hong Kong before the new rules take effect.
The SFC confirmed that from June 1, companies operating without obtaining the license will face legal charges. The financial regulator will consider unlicensed crypto firms to commit criminal offenses.
In the meantime, the SFC will conduct an on-site inspection to examine the compliance of the VASPs group under the deemed-to-be licensed category. The proposed inspection will evaluate whether the crypto firms were taking adequate security measures to safeguard customers’ funds.
Crypto Firms Withdraw Licensing Application in Hong Kong
Also, the SFC will examine whether the VASPs conform with the international know-you customers (KYC) measures. The financial regulators advised the residents of Hong Kong to only trade on authorized crypto exchanges.
The financial regulator urged the VASPs awaiting for licensing approval not to onboard new users on their platform until they are licensed. The SFC’s new licensing regime aims to prevent individuals from mainland China from accessing Hong Kong-based crypto firms.
China’s anti-crypto move compelled neighboring country Hong Kong to enact strict measures on cross-border transactions between the two countries. A review of the SFC website demonstrates that 18 applications were awaiting approval, while 11 application withdrew their application.
The SFC report shows that only two crypto firms, OSL and Hash Blockchain Limited, have been legally allowed to operate in Hong Kong since June. The SFC noted that the day before the licensing deadline, fast-paced crypto firms, including IBTCEX, Huobi HK, and HTX, withdrew their application.
Hong Kong New Crypto Rules
Earlier this week, the Gate.HK revealed plans to cease its operation in Hong Kong due to regulatory pressure. The Gate.HK withdrew its application on May 23 to address a significant overhaul of its trading platform.
The Gate. The HK team confirmed that withdrawal and deposit will remain unavailable until the crypto exchange obtains a license to operate in Hong Kong. The Gate.HK confirmed new users should not be on board the platform or proceed with marketing activities.
The Gate.HK will focus on reorganizing the platform, which will involve delisting tokens. The crypto exchange will resume operation in August this year.
A statement from the TRM Labs policy adviser Angele Ang reveals that SFC on-site inspection will involve thorough regulatory scrutiny compared to the ordinary examination during the application stage.
The executive noted that the numerous applications that were withheld demonstrated SFC’s commitment to safeguard the crypto world.
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