Hong Kong's administrative region is planning to regulate cryptocurrencies like Bitcoin, to issue licenses to crypto companies and ensure the safety of investors.
Xu Zhengyu, Secretary for Financial Services and Treasury of the Hong Kong Special Administrative Region, said that financial authorities in the region are preparing a draft law to create a comprehensive regulatory system for Bitcoin, cryptocurrencies, and other virtual assets. The proposal seeks to generate confidence in the crypto market, guarantee the security of investors and develop a new policy that leads to the sustainable development of the industry.
Hong Kong's proposed new regulatory system will authorize the Monetary Authority or the Securities and Futures Commission to issue licenses to cryptocurrency companies in the region, while also allowing for greater control and supervision over the crypto industry. Zhengyu he pointed that the regulatory measures that are to be established in Hong Kong aim to guarantee the responsible and sustainable development of the crypto industry and address the challenges that it poses, such as the risks of money laundering, possible fraud against investors, among others.
The regulatory proposal being prepared by Hong Kong officials is based on the standards of the Financial Action Task Force (FATF) and is in line with the recommendations of the Financial Stability Board (FSB), Zhengyu said. The proposal could be submitted to Hong Kong's Legislative Council for consideration and possible approval later this year.
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Hong Kong, a niche for the crypto industry
Hong Kong is one of the largest financial ecosystems in the world. As a result, cryptocurrencies have seen a significant boom in the region in recent years, despite the harsh restrictions imposed by China on this market. Thus, in order to supervise the crypto industry and minimize the potential risks of its adoption, the Hong Kong region wants to regulate virtual assets, both securities and non-securities, such as Bitcoin; currently the largest cryptocurrency on the market with a total capitalization of 790.000 billion dollars.
Although Hong Kong is part of China, a country that banned any type of activity related to Bitcoin and cryptoassets in the middle of last year, the region applies the principle of “one country, two systems”, which allows you to enjoy a high degree of internal autonomy.
Zhengyu's statements indicate that Hong Kong will take advantage of this autonomy to create its own licensing system for crypto companies and strengthen regulation of cryptocurrencies, including stablecoins as a means of payment. In January this year, the Hong Kong Monetary Authority accurate that cryptoassets were becoming an important part of the financial system, attracting attention in the international regulatory community.
Application of traditional legislation to the crypto industry
Zhengyu also explained that cryptocurrency companies and financial service providers with virtual assets will have to comply with some of the existing regulations in the traditional industry, as will be presented in the draft proposal. For example, compliance with requirements and responsibilities related to anti-money laundering, terrorist financing and market manipulation is proposed to protect investors.
Furthermore, considering the high-tech nature of the crypto market, Hong Kong regulatory authorities will also set relevant requirements to minimize potential risks, such as system or cybersecurity failures. Hacks, exploits, and ransomware attacks have become more common and frequent in the crypto industry in recent years.
Eyes on cryptocurrencies
Zhengyu's remarks come at a time when global regulators have their eyes set on the cryptocurrency industry. In the United States, President Joe Biden recently signed an executive order ordering the development of regulations applicable to the crypto industry. Like Hong Kong, the United States wants to regulate and supervise cryptocurrencies in a sustainable and responsible manner, the statement said. decree Biden's.
At the end of 2021, the Bank of England noted that it would intensify discussions with crypto industry participants to design regulations and legislation that guarantee economic security and stability within the global system. Also, in other regions of the world, such as South America, regulators and governments are working on creating new regulatory structures that address the risks of cryptocurrencies to provide monetary and financial security and stability.
Zhengyu said the cryptocurrency industry generally agrees with the government and regulatory agencies that Hong Kong needs to implement appropriate measures to allow the development of this market responsibly. Meanwhile, in China, authorities intensified regulatory measures against the use of cryptocurrencies, threatening with jail those who use these digital assets to raise funds.
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