Cryptocurrency exchanges operating in Hong Kong are up for a makeover soon as the country’s regulatory authority is all set to publish a new legal framework for the exchange platforms later today.
According to a Reuters’ report published earlier today, Chief Executive Ashley Alder introduced the upcoming set of rules and regulations crypto exchanges operating in the country at a local fintech event. The new guidelines by Hong Kong’s official regulator, the Securities and Futures Commission (SFC), will also be focusing on Bitcoin (BTC) and securities in addition to exchange platforms.
The cryptocurrency industry is a bit of a hot topic amongst regulators across the globe, as they continue to debate on the potential of the crypto phenomena all the while navigating through the broader systematic risks that it imposes. And as the crypto industry is still very much new, market watchdogs are figuring out how to regulate it, if they should regulate it at all.
The new framework is Hong Kong’s effort to provide proper regulations for the major devices involved in the crypto ecosystem, without hampering the potential growth of the industry in the country, which homes to several of the world’s largest crypto exchanges like OKEx and Bitfinex amongst others. However, despite the presence of several exchanges in the country, most were not regulated by the SFC because most virtual assets offered by the platforms fall outside the definition of a security, Adler explained.
Now the regulations, set to release today, will focus on the standards that the SFC expects for conventional securities brokers operating in Hong Kong. The rules will also cover other aspects including custody, know-your-customer (KYC) requirements, anti-money laundering (AML) rules and market manipulation in addition to addressing other issues specific to the crypto industry.
The framework will enable virtual asset trading platforms to be regulated by the SFC, a major development, which builds on a way forward I outlined at the same time last year
Adler said while addressing the previous guidelines that were established for digital currencies and crypto exchanges last year in November at Hong Kong’s 2018 Fintech Week. He further revealed that since last year the regulatory body had been in contact with a large number of crypto platform operators in order to discuss if some platforms were capable of operating in a regulated environment. He added:
After an in-depth examination of their unique technical and operational features, we concluded that some could be regulated by us.
Exchange platforms in the country can apply to be regulated by the SFC from Wednesday.