Key Points

• Hong Kong is gearing up to introduce a regulatory framework for over-the-counter (OTC) crypto trading platforms.
• The Secretary for Financial Services and the Treasury, Christopher Hui, emphasized the risks associated with OTC venues, citing their accessibility and involvement in fraud cases.
• The Securities and Futures Commission (SFC) will assess applicants to ensure they meet regulatory requirements and had substantial operations in Hong Kong before the licensing system began.
• The HKMA plans to establish a sandbox for exploring stablecoin issuance, fostering collaboration with key industry players in the region.

Hong Kong is on the verge of introducing a groundbreaking regulatory framework addressing the operation of over-the-counter (OTC) crypto trading platforms. In a recent blog post, Secretary for Financial Services and the Treasury, Christopher Hui, underscored the imminent release of a consultation that aims to examine and regulate OTC venues.

Hui raised concerns about the risks associated with OTC platforms, particularly their accessibility and involvement in fraudulent activities. He highlighted instances where OTC venues played a role in misleading investors, channeling funds to unlicensed virtual asset trading platforms, and emphasized the necessity of bringing OTC venues under regulatory oversight.

This move follows Hong Kong's establishment of a licensing framework for virtual asset trading platforms in June 2023, with licenses granted to platforms like HashKey and OSL. Existing virtual asset service providers were given a transition period to submit license applications, and the Securities and Futures Commission (SFC) will assess applicants against regulatory criteria.

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As the deadline for license applications approaches, the SFC is gearing up for enforcement activities and intensifying publicity initiatives to ensure compliance. In parallel, a consultation on stablecoin issuance, conducted by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau, is set to conclude this month. The consultation outlines that stablecoin issuers referencing the value of fiat currencies in Hong Kong would require licensing.

Looking ahead, the HKMA envisions creating a sandbox dedicated to exploring stablecoin issuance, fostering collaboration with key industry players in the region. This multifaceted approach reflects Hong Kong's commitment to staying at the forefront of regulatory advancements in the dynamic realm of cryptocurrency and financial services.

For further insights consider exploring: APRNEWS/CRYPTO