- Cryptocurrency trading platforms in Hong Kong will soon be subjected to full legal scrutiny as the nation’s financial watchdog plans to release a new regulatory framework.
- The Hong Kong’s Securities and Futures Commission (SFC) announced that it plans to regulate all cryptocurrency exchanges in the country, Reuters reported Tuesday.
- Hong Kong has struggled in the past with unclear rules for crypto exchanges. After a first failed attempt in 2018, the country published an “opt-in” framework for crypto platforms that offer trading services in the region last year.
- However, the regulation was limited to exchanges that traded assets officially classified as a “security” or offer their services to institutional investors, the report said.
- Only a few trading platforms applied for a license after the framework was published in November 2019. Although exchanges that applied are yet to get a full license from the SFC, the regulator has agreed to issue a license to crypto exchange OSL, the first company to apply for the license.
- It was believed that the framework was reductant since it did not apply to the majority of the exchanges that operate in the region; neither did it provide clarity for local companies.
- However, there’s a growing concern that some exchanges are operating completely off the regulatory radar. Since the regulation does not provide clarity, most exchanges simply leverage the existing regime’s limitations by focusing on cryptocurrencies like BTC and ETH instead of regulated security tokens.
- The watchdog now plans to propose a new framework with clearly defined rules for exchanges. The new regulation will require all crypto trading platforms in the country as well as foreign exchanges targeting Hong Kong investors to apply for an SFC license, whether they deal with security tokens or not.
- In recent times, countries across the world are adopting clearer policies for crypto-assets and trading platforms. For instance, in August, Ireland announced that it plans to police crypto exchanges and wallet providers as part of its efforts to curb money laundering activities.
- The UK Financial Conduct Authority is also exploring further crypto regulations and may require cryptocurrency businesses to file a report on how they deal with financial threats.
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