Hong Kong’s legislative council has added a new amendment to the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 to accommodate the cryptocurrency industry.
The legislation will essentially introduce a licensing regime for virtual asset service providers (VASPs).
Hong Kong’s Licensing For VASPs
Under the new additions, VASPs seeking to start operations in the region will have to undergo a licensing procedure complying with AML guidelines and investor protection laws. Failing to do so may attract a fine of $5 million and imprisonment for 7 years, according to a report from Colin Wu.
A clampdown on misleading crypto advertisements is yet another aspect of the new legislation. Meanwhile, fraudulent and deceptive crypto transactions may draw penalties of $10,000,000 and imprisonment for 10 years. The new licensing regime will come into effect in June of next year.
Despite the FTX collapse sending shockwaves across the industry, Hong Kong has been fairly bullish on the sector.
Legalizing Retail Crypto Trading
Earlier this year, the Hong Kong government hinted at rolling out a mandatory licensing program for crypto platforms that will enable retail crypto trading. The former global center of crypto companies, such as Binance, Amber Group, Q9 Capital, and FTX, plans on repositioning itself as a global crypto hub.
More recently, three asset management companies – CSOP Asset Management, Samsung Asset Management, and Mirae Asset Global Investments – have submitted their ETF applications to the Securities and Futures Commission (SFC) in Hong Kong. The followed filing SFC’s announcement that it could allow retail investors to trade in digital asset-linked ETFs.
According to Yat Siu, the co-founder of Web 3 behemoth Animoca Brands said that Hong Kong may soon replace Singapore as Asia’s top crypto hub:
“Singapore has pulled after Terra Luna and Three Arrows situation. And now they have some competition from Hong Kong. Hong Kong recently announced its policy. I think the timing is interesting for Hong Kong because they are entering at a time when the market is struggling and slower, which is a good entry point for them.”