There is movement in the important crypto market in Hong Kong. The local supervisory authority SFC announced that it would regulate platform operators in the future.
• Voluntary regulation is followed by mandatory licensing
• Investor protection and the fight against money laundering are to be improved
• Various scandals recently rocked the crypto industry
Hong Kong is without question an important financial center for crypto exchange operators. Crypto giants such as BitMEX, OKEx and Huobi are located in the special administrative region of China, along with many other digital exchanges. While other financial hubs such as Singapore or Japan have already regulated the market for digital currencies by the local supervisory authorities, Hong Kong has so far pursued an “opt-in” approach, which means that regulation is carried out on a voluntary basis.
But that should now be over, as the Reuters news agency recently informed. Last year, Hong Kong’s Securities and Futures Commission (SFC) decided to regulate all crypto platforms that offer more than one asset that is officially recognized as a security or future. However, other crypto exchanges that did not trade securities were not included.
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As SFC CEO Ashley Alder said in a speech during FinTech Week, this approach was subject to considerable restrictions, “as under the current regulatory framework a platform operator who is determined to act unregulated could easily do this by ensuring that the traded crypto-assets do not correspond to the legal definition of an asset “.
In order to close this regulatory gap, Alder is proposing a new licensing scheme. This states that all crypto exchanges operating in Hong Kong must from now on apply for a license from the SFC if they want to continue offering their services in the Special Administrative Region. Another reason is the efforts of the Hong Kong government to fight money laundering.
In addition, various scandals in the crypto industry are likely to have contributed to the SFC’s change of strategy. The digital exchange BitMEX has been in a legal dispute with the US Department of Justice and the US Commodity Futures Trading Commission since the beginning of October. They accused founders Arthur Hayes, Ben Dalo and Samuel Reed of violating anti-money laundering regulations and of failing to implement a necessary customer information program. All three BitMEX executives are now no longer working for the crypto exchange.
According to media reports, OKEx founder Mingxing Xu, also known as Star Xu, was also interrogated by the Chinese police. In the course of this, the trading platform decided to temporarily suspend its crypto payouts. These have not yet been resumed. Nevertheless, the crypto exchange recently denied rumors of an investigation against Xu: “The claim that a person connected to the OKEx is in custody has been refuted. We can confirm that this is a rumor,” it says in one Communication from the company. In addition, the platform assured its customers that “100% of their funds can be paid out again as soon as we lift the withdrawal stop. Our business is stable and normal”.
Similar rumors about the arrest of Huobi COO Zhu Jiawei also recently caused unrest among crypto fans. However, the crypto exchange also denied this speculation via Twitter and assured that the Huobi business would continue to run normally.
Huobi Global Is Operating Normally
We have become aware of rumors within our community about the arrest of a Huobi senior executive by local officials. We can share with confidence that these rumors are false.
-Huobi (@HuobiGlobal) November 2, 2020
It turns out that there is still a lot of unrest in the still new industry around cyber currencies. Stricter regulation by the official authorities could help to improve investor protection and also to address the challenge of combating money laundering in a concerted manner. This should also help with an increasing adaptation of cryptocurrencies and eliminate the black sheep that contribute to the often dubious reputation of digital currencies.
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