What is Cryptocurrency?
Cryptocurrency is a type of private asset that depends primarily on cryptography and distributed ledger technology.
Cryptocurrency was originally designed to facilitate the transfer of value without the need for a trusted third-party intermediary.
Current Regulation on Cryptocurrencies in Hong Kong
- Entities conducting activities in cryptocurrencies where the relevant cryptocurrencies are “securities” or “futures contracts” as defined in Hong Kong’s Securities and Futures Ordinance are regulated by the Securities and Futures Commission (“SFC”).
- Intermediaries conducting regulated activities in relation to cryptocurrencies that are securities or futures contracts are required:
- to be licensed or registered by SFC; and
- must comply with the anti-money laundering and counter-terrorist financing requirements of Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”).
Proposed Regulations on Cryptocurrencies
The Government proposes amending the AMLO to introduce, inter alias, a licensing regime for virtual asset service providers (“VASP”) in 2022.
Persons seeking to operate a virtual asset exchange in Hong Kong will be required to apply for a VASP licence from the SFC.
Licensed VASPs will be required to comply with the anti-money laundering and counter-terrorist financing requirements under AMLO.
The clients of VASPs are restricted to professional investors only.
