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Hong Kong’s government is planning to change the rules for crypto trading firms that operate or offer services within the city. Clara Chiu, the director of licensing at the Securities and Futures Commission (SFC) disclosed these details through a keynote speech during the Hong Kong FinTech Week 2020. Chiu reportedly unveiled details of a consultation paper, which proposes an expansion of SFC’s regulatory scope so that the agency oversees all centralized virtual asset trading platforms in Hong Kong.

According to a report, the entity seeks total control regardless of whether the trading platforms provide access to tokens categorized as securities or whether they deal solely in cryptocurrencies such as BTC and ETH. This move comes after the regulator previously introduced a regulatory framework in the past year, which sought to treat crypto trading platforms that deal with at least one token under the same rules as securities brokerages. However, signing up with the regulator was voluntary.

Commenting on the proposed changes, Ashley Alder, SFC’s CEO, said,

“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. Consequently, the Hong Kong government will propose a new licensing regime today under its anti-money laundering legislation, requiring all cryptocurrency trading platforms that operate there, or target investors in the city, to apply for an SFC license.”

According to Chiu, these changes align with guidelines from the Financial Action Task Force (FATF). As such, all crypto trading platforms will have to apply for an SFC license under Hong Kong’s anti-money laundering legislation. The regulator went on to note that Hong Kong is a FATF member and that the city is under the obligation to align with AML standards for virtual asset providers.

Chiu went on to note that the platforms should strive not to commit serious breaches such as market manipulation, as this will result in the agency intervening and restricting their operations. Under the proposed regime, FCS will only allow crypto trading platforms to serve professional investors at the start. On top of this, they will have to maintain high levels of investor protection and security. However, the new proposed framework will not change anything for platforms that are currently operating under the security token regime.

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