Hong Kong's Securities and Futures Commission, known as the SFC, is requiring all cryptocurrency exchanges, trading platforms and exchanges in the region to have the necessary licenses to provide their services in a safe and regulated manner.
In Hong Kong, November begins with strong regulations, especially for exchanges de cryptocurrencies, operating from this region, as the Securities and Futures Commission (SFC) of Hong Kong required that all cryptocurrency and digital asset trading platforms have their respective licenses to provide financial services within its jurisdiction.
For years, Hong Kong’s securities regulator has been stepping up its efforts to regulate all trading operations involving cryptocurrencies and digital assets. In 2019, the SFC launched a new regulatory framework that required cryptocurrency exchanges to voluntarily register with the regulator for evaluation of the issuance and approval of licenses for these digital asset trading platforms.
Now, with the new regulations, announced On November 3, the Securities and Futures Commission (SFC) takes a major step towards regulation, requiring licensing for all crypto exchanges and exchanges that provide services in and from its jurisdiction. With the new regulations, the SFC seeks to ensure the protection of investors and their funds, as well as the prevention of financial crimes within the Asian region.
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From voluntary to mandatory
As mentioned, previous SFC regulations allowed cryptocurrency exchanges to voluntarily register with the securities regulator and apply for licenses that allow them to operate legally and in a regulated manner within China's administrative region. But now, with the rise of financial crimes and cyberattacks targeting cryptocurrency and digital asset service companies, which have cost the world's stock exchanges millions of dollars, the Asian regulator considers it essential that all companies providing services within its jurisdiction have the licenses required to provide services in a guaranteed manner.
The Hong Kong Securities and Futures Commission seeks to minimise the risks of illicit activities within these companies and services, as well as to ensure the safety and integrity of investors and their funds. Ashley Alder, SFC CEO, highlighted that:
“This is a significant limitation, as under the current legislative framework, if a platform operator is truly determined to operate completely off the regulatory radar, it can do so by simply ensuring that its traded cryptoassets do not fall within the legal definition of a security.”
Regulations for securities and futures, not for Bitcoin
Alder stressed that Hong Kong's regulations are aimed at all those trading platforms with cryptocurrencies and digital assets, which trade and deal with digital assets classified as securities or futures by the entity, and not with cryptocurrencies or tokens as BitcoinThe SFC has already made mention of this, highlighting that it only has the power to regulate a platform that trades in cryptocurrencies and digital assets legally considered as securities or futures, and not in Bitcoin and other similar cryptocurrencies that “are not securities.”
Protection for investors and their funds
According to Alder's previous statements, the regulations imposed by the Hong Kong SFC ensure that the cryptocurrency and digital asset industry complies with current regulations regarding the safe custody of funds and assets, as well as compliance with KYC and AML, Know Your Customer and Anti-Money Laundering requirements respectively. These regulations prevent malpractice and market manipulation that can put the security and integrity of investors' funds at risk.
The SFC regulations include new concepts to the legal framework of the region, which are specific to the crypto industry, such as cold and hot wallets (cold wallet y hot wallet), airdrops, among others.
License for OSL Digital Securities (OSL)
Hong Kong is home to several of the world’s largest and most well-known cryptocurrency exchanges, yet to date, Hong Kong’s securities regulator has not issued a full license to any of the region’s cryptocurrency platforms or companies, although it is considering issuing a license to Fidelity-backed cryptocurrency company OSL Digital Securities.
On the other hand, in view of the new demands imposed on the administrative region of China, several experts and analysts, such as the general director of BC Group, Hugh Madden, point out that cryptocurrency trading platforms could leave Hong Kong and establish themselves in other regions that have more friendly regulations for the development of the industry.
Crypto-friendly jurisdictions
It is important to highlight that regulation targeting cryptocurrency trading platforms is nothing new, as the growing popularity of these digital assets within society's daily activities drives regulators to implement new measures that protect and benefit investors. Even jurisdictions favorable to the development of these companies and businesses, such as Japan and Singapore, have regulations and legislation to guarantee security and integrity within this growing industry, although less strict than those of other regions and countries around the world.
Recently, Ripple CEO, Brad Garlinghouse, announced That between these two countries, Japan and Singapore, is its possible destiny if it decides to leave the United States, due to the lack of regulatory clarity of the American nation in relation to service companies with cryptocurrencies and digital assets. Likewise, other regions quite favorable for the growth of the crypto industry are Switzerland and the United Kingdom.
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