Hong Kong’s New Crypto Rules Explained

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In an effort to position itself as a crypto hub, Hong Kong launched its manual Virtual Asset Trading Platform (VATP) earlier this month. The Securities and Futures Commission (SFC) has provided the guidelines for cryptocurrency companies wishing to operate in the country and will oversee all licensing.

Now, an explanation of the guidelines by Gilbert Ng, Attorney at the High Court of the Hong Kong Special Administrative Region and Chris Lee, Founder of TKX capital, has been translated and published today by Wu Blockchain.

The idea behind the transition agreements is to offer a one-year trial period to crypto businesses operating in the country. Businesses can then apply for a business license in 2024, if they tick all the boxes.

According to the translated publication, companies will be allowed to operate if the SFC has determined that they have genuine operations and business practices. The document notes that this only applies to non-securities trading venues.

What constitutes real operations and real practices? The SFC determined several factors, including: whether the platform is based in Hong Kong, whether it is controlled and operated by employees based in the city, whether it has an office there, and a number of other requirements.

The Hong Kong guidelines are intended to make operators or people who run cryptocurrency exchanges more accountable. It establishes the presence of regulated persons such as directors, responsible officers and managers.

These people, according to the newly approved rules and regulations, will have to pass an aptitude and aptitude test. This will require crypto company officials to prove relevant experience in regulated environments, even if that experience is in other countries.

The handbook also says companies that actively market to Hong Kong residents fall under the jurisdiction of regulators. There are also guidelines that establish whether a business needs an SFC license, such as having a detailed marketing plan for retail investors in the city or whether trading is allowed in Hong Kong dollars.

It seems Hong Kong regulators are taking such a tough stance on corporate liability after the dismal and disappointing performance of some cryptocurrency companies this year.

And despite its proximity to notorious anti-crypto China, Hong Kong aims to create the regulatory atmosphere that attracts digital asset companies from around the world.

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