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Hong Kong Government Promises Rules for Stablecoins, OTC Services

The Hong Kong government, in a press release on Wednesday, informed that a public consultation was launched on February 8, 2024, regarding legislative proposals for a licensing regime for providers of virtual asset over-the-counter (OTC) trading services. The proposed regulations cover all OTC services, including conversion between fiat currencies, stablecoins, and virtual currencies, aiming to strengthen AML/CTF measures and investor protection.

It also emphasized its commitment to implementing an effective regulatory regime to protect investors in the virtual asset space. In response to growing concerns about suspected fraud cases involving virtual asset trading platforms (VATPs), the Secretary for Financial Services and the Treasury, Mr. Christopher Hui, provided a detailed reply to questions raised by the Hon Carmen Kan during today’s Legislative Council session

The Securities and Futures Commission (SFC) has actively responded to suspected fraud cases involving VATPs listed on the “List of Suspicious VATPs.” As of February 14, 2024, 14 VATPs were on the list. The SFC has taken various measures, including public announcements, social media posts, investigations, and collaboration with the police to address potential breaches of legislation and block websites associated with fraudulent activities.

The number of virtual asset-related criminal cases has increased over the past three years, with 3,415 cases reported in 2023. The amounts of money involved in these cases were $824 million (2021), $1,704 million (2022), and $4,398 million (2023). Specific figures regarding the number of persons arrested and prosecuted were detailed for individual cases, such as the JPEX case.

The joint working group formed by the Hong Kong Police Force and SFC has facilitated information sharing on suspicious activities and breaches related to VATPs. An information-sharing mechanism has been implemented, leading to the exchange of intelligence on over 100 cases involving VATPs or suspicious virtual asset-related activities.

The Financial Services and the Treasury Bureau is actively working on legislative proposals for regulating businesses involved in virtual currencies, including the introduction of a licensing regime for providers of virtual asset over-the-counter trading services.

Hong Kong has adopted a comprehensive framework to regulate virtual asset activities, with a focus on investor protection. The SFC considers corporate and management structures of license applicants, requiring a sound business model, detailed risk management policies, and measures against market manipulation.

 

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