Existing Virtual Asset Operators Given Transitional Period To Comply With Proposed Legislation In Hong Kong ⋆ ZyCrypto

Effective June 1, 2023, all new Virtual Asset (VA) trading platforms doing business or targeting investors in Hong Kong must be licensed and regulated by the Securities and Futures Commission (SFC). SFC is the independent legal entity that regulates the Hong Kong securities and futures markets.

In November 2020, through a consultation document, the Government of Hong Kong sought views on a legislative proposal to introduce a licensing regime for Virtual Asset Service Providers (VASP) under the Anti-Money Laundering Act (AMLO) and the Counter-Terrorist Funding Act (AMLO). VASP regime).

Pre-existing VA trading platform operators will be given a transition period to apply for licenses or be asked to close their operations. This is all detailed in a consulting paper released by SFC on the proposed regulatory requirements for VA trading platforms under the AMLO VASP regime, which will become effective on June 1, 2023.

“As has been our philosophy since 2018, the terms we have proposed for the virtual asset trading platform include strong measures to protect investors, adhering to the principle of ‘same business, same risk, same rules’,” said Leung, Chief Executive Officer of SFC.

SFC proposes a 12 month transition period for existing VA operators (already licensed by SFC). The transition period is to allow these VA operators to revise their systems and controls to meet some of the requirements for their legislative proposals.

As part of the transition process, starting June 1, 2023, all VA trading platform operators doing business in Hong Kong or actively marketing services to Hong Kong investors without a valid license from SFC will be in breach of the license terms, except for VA trading platforms that are eligible to transition settings.

For transitional arrangements, the VA trading platform must be operational in Hong Kong or must commence trading of non-security tokens in Hong Kong before June 1, 2023.

Following the start of the AMLO VASP regime, all centralized VA trading platforms conducting business in Hong Kong, or actively marketing their services to Hong Kong investors must be licensed and regulated by the SFC.

A non-infringement period between 1 June 2023 and 31 May 2024 has been established for eligible VA trading platforms to continue operating in Hong Kong after the start of the AMLO VASP regime.

Through a consulting paper released on February 20, 2023, SFC has asked the public and industry to comment on the proposed regulatory requirements for licensed VA operators by March 31, 2023.