2024-02-12 10:04:45
Hong Kong regulators want to expand the scope of crypto trading activities subject to strict licensing requirements and testing procedures.
The purpose of the proposed legislation is to limit the range of instruments available to clients on over-the-counter (OTC) trading platforms. Thereby increasing regulatory oversight within the crypto industry.
Hong Kong regulators plan to regulate OTC crypto trading platforms
In a recent public consultation initiated by Hong Kong Financial Services and the Treasury, the public was asked whether they agree that crypto regulation should be extended to OTC trading of crypto assets.
Over-the-counter trading offers a wider range of assets, but also carries greater risks. However, if the proposed legislation goes into effect, it will be subject to the same regulatory requirements as traditional crypto exchanges.
Consequently, this results in fewer products being sold to customers.
Under the proposed regime, any person providing any VA5 spot trading service in Hong Kong will be required to hold a license issued by the Commissioner of Customs and Excise (“CCE”), subject to a fit and proper examination and other factors deemed relevant by the CCE.
The primary reason for initiating the public debate is concern regarding anti-money laundering measures. OTC trading is not currently subject to the strict requirements of centralized crypto exchanges.
The latest raid by the Hong Kong SFC
Data from Mondo Visione reveals that OTC counters boast a significantly higher average daily trading volume compared to centralized crypto exchanges.
In 2023, OTC desks recorded an average daily trading volume of $1.44 billion. Institutional CEXs, however, averaged around $74.5 million.
Average daily trading volume, 2023 – institutional CEXs vs. OTC Desks. Source: Source: Mondo Visione
At the same time, there is an increased risk of facilitating money laundering.
Meanwhile, Hong Kong’s Securities and Exchange Commission (SFC) struck down to crypto exchanges operating in the region without a license.
The deadline was set for the end of this month, February 29. This is the latest that crypto exchanges can continue to operate without proper authorization.
The regulator also emphasized the importance of investors doing their own due diligence. He emphasized that investors should make sure that the crypto trading platforms they use have the right licenses.
Investors should check whether VATP is included on the list of authorized virtual asset trading platforms or the on the list of applicants for a virtual asset trading platform.
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