Hong Kong will require all cryptocurrency trading platforms to apply for a license from the Securities and Futures Commission.
Hong Kong is planning to make changes to the regulations that govern its crypto industry. Specifically, the financial hub is pushing to regulate all cryptocurrency trading platforms operating in the territory whether or not they trade in securities.
Hong Kong’s Securities and Futures Commission (SFC) proposed that all cryptocurrency platforms operating in the special administrative region should be regulated, Decrypt reported. The move is aimed at addressing a loophole in the current regulations on crypto trading platforms.
In 2019, the SFC launched a regulatory framework to govern crypto trading platforms. However, the framework was restricted only to those platforms that were trading assets officially recognized as a security. This means that platforms that traded in cryptocurrencies, which are not classed as securities, were not included in the existing regulations and they can opt not to apply for a license from the SFC.
“This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security,” SFC chief executive Ashley Alder said on Tuesday, Reuters reported.
The Hong Kong government wants to rectify the loophole by pushing for a more inclusive regulatory approach. Once approved, the SFC will be requiring all cryptocurrency trading platforms to apply for a license whether they trade in assets classified as securities or not.
Aside from including all cryptocurrency trading platforms operating in Hong Kong, the new licensing regime will also include platforms that target investors in the city. This will become part of the region’s wider money laundering regulations.
Reuters noted that there are dozens of cryptocurrency exchanges operating in the city. However, many opted not to apply for a license from the SFA under the existing licensing requirements. In fact, the regulator has not yet issued a full license to any exchange at the moment.