Hong Kong is contemplating modifications to its cryptocurrency regulatory framework, notably regarding over-the-counter (OTC) digital asset buying and selling companies.
The Securities and Futures Fee (SFC) could play a bigger function in overseeing the sector, working alongside the Customs and Excise Division (C&ED), based on a latest report from the South China Morning Put up.
Hong Crypto OTC To Be Regulated
Notably, the proposed modifications would shift from the present system, the place the C&ED primarily handles OTC companies. For context, OTC companies facilitate direct, non-public cryptocurrency transactions between massive events, bypassing the necessity for a public change.
South China Morning Put up reported that the SFC’s potential involvement in regulating OTC companies would align it with its broader duties over the monetary markets, doubtlessly offering extra readability for the crypto trade.
Citing unnamed sources conversant in the discussions, the report additional disclosed that the SFC has consulted with trade gamers on this new licensing regime.
The SFC and the C&ED collaboration could be a key a part of these regulatory developments, addressing issues in regards to the separation of duties between the 2 entities.
Along with OTC buying and selling companies, the SFC can also be exploring introducing a licensing regime for cryptocurrency custodian companies, a important component of the market’s infrastructure.
Why The Regulation On OTC?
Hong Kong’s method to cryptocurrency regulation follows the numerous monetary losses and rising issues over fraud within the sector.
In response to the report, the collapse of JPEX, particularly, has pushed authorities to look nearer on the function of OTC companies, which have turn out to be “major avenues for channeling retail traders’ funds” into illicit schemes.
The report highlighted additional that these companies usually function via “bodily retailers”, lots of which have been tied to fraudulent actions, highlighting the necessity for extra “stringent oversight.”
In response to the rising dangers, an SFC consultant famous:
To foster the sustainable and accountable improvement of the digital property trade in Hong Kong, the SFC works carefully with the federal government and different regulators in creating a strong, clear and constant regulatory atmosphere in Hong Kong
Nevertheless, regardless of the appreciable justification for regulating the OTC crypto sector within the area, the report talked about that people are nonetheless apprehensive about how the regulation will work, noting:
Some within the trade complained that placing all OTC retailers beneath the C&ED, which regulates cash changers, was inflicting confusion on condition that the SFC regulates different areas of crypto funding.
Regardless, the Monetary Providers and the Treasury Bureau (FSTB), which initially sought public suggestions on the OTC laws over a two-month session interval famous that the proposal obtained “basic help from respondents.”
Moreover, though the total outcomes of the session are but to be launched, the FTB disclosed that the bureau is now reviewing the design of the regulatory framework based mostly on the suggestions supplied.
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