New Hong Kong Crypto Licensing Regime to Come Into Force on 1 March 2023 

July, 2022 - Stefano Beghi, Davide De Rosa, Richard Grams

An amendment to Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”) will be introduced to the Legislative Council for first reading on 6 July 20221, as the next step toward establishing a licensing regime for virtual asset service providers (“VASPs”) early next year.   


All cryptocurrencies (except digital versions of fiat currency) are referred to in the Amendment Bill as “virtual assets”, and the proposed regime is aimed at eventually regulating every person carrying on a business of operating a “virtual asset service” in Hong Kong by distributing, dealing with, or advising on any virtual assets that fall within Hong Kong’s statutory definition of securities or futures contracts. Such businesses will be considered VASPs and accordingly, will be required to obtain a licence from the Securities and Futures Commission in Hong Kong (“SFC”). At the moment, regulators are focusing on crypto exchanges that facilitate trading such virtual assets.  


Under the proposed amendments to AMLO, a virtual asset exchange will be defined as providing services through electronic facilities whereby offers to sell/purchase cryptocurrency are regularly made and accepted in a way that forms or results in a binding transaction, or where persons are regularly introduced to other persons so that they can negotiate or conclude such purchases or sales of virtual assets, and where client money or virtual assets comes into either direct or indirect possession of the service provider.  


 

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