- Hong Kong to announce new regulatory plan for cryptocurrencies by July and implement it by 2023/2024.
- After the implementation of the new regime all virtual assets to be regulated and supervised.
- HKMA is also of the view to adopt a risk-based approach.
- The new licensing would initially require only offering services to professional investors until the market becomes more mature.
Hong Kong is expecting to construct a new regulatory plan for cryptocurrencies. The formulation of the road map will take place by July of this year. The new regulatory plan will be implemented nearly by 2023/2024.
Earlier on November 3, 2020, the chief executive of the SFC said that Hong Kong would soon regulate all cryptocurrency trading platforms, regardless of if they trade securities. Before this, platforms operating in Hong Kong that offered to trade at least one security token had the option to be licensed by the SFC, but the SFC’s 2020 statements show the Commission’s intent to widen their regulatory approach.
The SFC stated that “once this new regime is in place, all virtual asset trading platforms in Hong Kong would be regulated, supervised and monitored under one of two regimes.“
Paramount to that, the HKMA is of the view that adopting a risk-based approach would be the most suitable way to take things forward. Although they stated that crypto-assets have not yet posed material risks to financial stability, it may not be the case for very long as there is increasing linkage of such assets with the traditional financial system, which poses more significant risks if the asset class continues to develop at pace.
Hence, bringing crypto-assets within the regulatory perimeter appropriately would help address the various risks posed to users and the financial system while embracing the potential benefit of financial innovations. As a result, many regulators around the world have begun the work.
This new legislation would initially ban retail investors from trading cryptocurrency. In addition, the new licensing requirement would require cryptocurrency trading platforms to only offer services to “professional investors” until the market becomes “more mature.” However, implementing this law will notably take Hong Kong from having minimal cryptocurrency regulation to outright banning retail crypto investors.