Hong Kong cracks down the crypto market, bans retail trading

Under its Anti-Money Laundering Ordinance, Hong Kong is set to push for crypto trading regulation in a measure to counter fraud, money laundering, and terrorism financing in line with global standards.

The Securities and Futures Commission (SFC) is looking to ban retail investors from buying and selling crypto tokens and altcoins. The independent statutory body’s crypto crackdown also includes the plan to require exchange platforms to be licensed.

During the Hong Kong Fintech Week last November 3, SFC Chief Executive Officer Ashley Alder shared that the local government will set a new licensing regime for firms that trade ‘any type of crypto asset even if not classified as securities’. This will cover trading platforms in Hong Kong and those based abroad targeting local investors.

Last year, the SFC launched a governing framework applied to crypto trading platforms. This was then reduced to those that traded an asset formally classed as a security or future aside from crypto tokens like Bitcoin (BTC).

‘This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar, it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security’, Alder said in his speech.

He further explained that the city’s crypto laws had flaws which made it plausible for some platforms to run their operations away from the regulative watch.

‘Consequently, the Hong Kong government will propose a new licensing regime today under its anti-money laundering legislation, requiring all cryptocurrency trading platforms that operate or target investors in the city to apply for an SFC licence’, he added.

Moreover, the government even planned to release a consultation paper to collect feedback on the proposed crypto laws. It aims to offer better protection to investors.

Secretary for Financial Services and the Treasury Christopher Hui Ching-yu affirmed, ‘Simply speaking, we will require all virtual-asset trading platforms to be operating transparently, like working under the sunlight’.

‘This move will strike a balance between regulation and development for the virtual asset market. It will help attract high-quality virtual asset dealers to settle in Hong Kong, strengthening Hong Kong’s position as an international financial centre’, he further said.

On the other hand, the cryptocurrency news has already been discussed with Hong Kong’s Bitcoin Association co-founder, Leo Weese.

‘With rumours of more crypto exchange officials arrested in China, and Hong Kong’s move to make trading illegal (aka licensed), we can declare Bitcoin’s honeymoon phase to be over. If you think Bitcoin will catch on, buy it now while you still can’, Weese wrote on a Twitter post.

There are many exchange platforms, including some of the world’s largest sites, that operate in Hong Kong. However, most of them chose not to apply for a license under the current regime.

The SFC is yet to issue a full license to an exchange. Be that as it may, it agreed to issue a license to crypto firm OSL Digital Securities in August. This firm is a unit of Fidelity-backed BC group 0863.HK.

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