18 June 2021
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Regulatory Developments
Hong Kong: FSTB publishes consultation conclusions on virtual asset services providers licensing regime
On 21 May 2021, the Financial Services and the Treasury Bureau (FSTB) published conclusions to its November 2020 consultation on introducing a new licensing regime for virtual asset services providers. According to the conclusions, the new licensing regime will be introduced through an amendment of the existing Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The plan is for the amendment bill to be introduced into the Legislative Council in the 2021-22 legislative session.
Under the proposal, the business of operating a virtual asset (VA) exchange will be a “regulated activity” under the AMLO, and any person operating a VA exchange will be required to apply for a licence from the Securities and Futures Commission (SFC) as a VA services provider. The SFC will consult on the detailed regulatory requirements before the licensing regime begins.
“VA” will be broadly defined as a digital representation of value that (i) is expressed as a unit of account or a store of economic value; (ii) functions (or is intended to function) as a medium of exchange accepted by the public as payment for goods or services or for the discharge of a debt, or for investment purposes; and (iii) can be transferred, stored or traded electronically, but subject to certain carve outs, such as digital representations of fiat currencies and certain closed-loop, limited purpose items which are non-transferrable, non-exchangeable and non-fungible in nature, such as air miles, credit card rewards, gift cards, customer loyalty programmes and gaming coins.
Licensed VA services providers will be subject to AML/KYC requirements under the AMLO, and can only offer services to professional investors. The new regime also prohibits the active marketing of a regulated VA activity in Hong Kong or from outside of Hong Kong, to the public of Hong Kong.
We reported on the SFC’s announcement of plans for a new crypto regulatory regime for VA exchanges in the November 2020 edition of the Global Payments Newsletter.
Take a look at our Regulatory Heatmap for Retail Banking and Fintech in Asia Pacific for more on the regulatory frameworks in the retail banking and financial industry in Hong Kong.
