Currently, China has tough regulations when it comes to crypto trading. In fact, the country has cracked down on the activity and banned such transactions in an effort to protect its population from speculative transactions and fraud attempts.
This crackdown resulted in many Chinese crypto-focused web3 businesses giving up on the opportunity to operate within their home market and plan their growth in jurisdictions where the regulation permits crypto trading. But given what is believed to be an unlimited potential of the crypto market, Beijing may be considering a more relaxed position for crypto trading, at least for Hong Kong, which is a city and a special administrative region within the country.
On Monday this week, Hong Kong’s Securities and Futures Commission (SFC), announced the launch of a consultation for a proposal that calls to regulate virtual trading platforms. The consultation will continue until March 31, 2023, while the new rules are planned to come into effect starting from June 1, 2023.
Ultimately, the proposal seeks to effectively regulate the virtual asset trading platforms, ensure their compliance with the regulations and protect the customers. Under the proposed regulations, the trading platforms would need to undergo licensing by the SFC to conduct business.
“As part of the consultation, the SFC is seeking views particularly on whether to allow licensed platform operators to serve retail investors, and if so, the measures to be implemented in addition to the proposed range of robust investor protection measures, which include ensuring suitability in onboarding clients and token admission,“
reads a statement released by the Securities and Futures Commission of Hong Kong
There’s a range of requirements that the platforms would need to meet. The virtual asset trading platforms would need to adhere to anti-money laundering rules and efforts against terrorism financing. In addition, they would have to implement effective know-your-customer, cybersecurity and risk assessment policies.
“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle.“
Julia Leung, CEO of the SFC
SFC’s CEO, Julia Leung, explained that the Commission has proposed rules that ultimately seek to protect the investors within virtual asset trading platforms. She explained that this was a proper tactic, considering that different trading platforms around the world have collapsed recently. “There is clear consensus among regulators globally for regulation in the virtual asset space to ensure investors are adequately protected and key risks are effectively managed,” said Leung in conclusion.