Hong Kong Wants a Regulated Cryptocurrency Trading Platform

Hong Kong will regulate all cryptocurrency trading platforms operating in the financial hub, urban marketplaces, as announced on Tuesday. It will change its previous approach to inclusion.

Financial regulators around the world are still examining whether and how to regulate the cryptocurrency industry where investor protection and money laundering prevention are essential.

Regulating Trading Platforms in Hong Kong

While the Hong Kong Securities and Futures Commission (SFC) introduced a specific regulatory framework for cryptocurrency trading platforms last year, it was limited to asset trading platforms officially classified as securities or futures, not just symbols like Bitcoin.

Ashley Alder, CEO of SFC, in his speech Tuesday, said that this is a significant limitation because of the current legal framework. If a platform operator is determined to operate outside the regulatory radar, it can do so by ensuring traded crypto-assets do not meet the matchbook value. 

As a result, the Hong Kong government will today propose a new licensing system as part of an anti-money laundering law that requires cryptocurrency trading platforms or investors in the city to apply for an SFC license, said Alder.

Many cryptocurrency exchanges operate in Hong Kong, including some of the largest in the world. However, many choose not to apply for a license under the current regime.

SFC has not yet given a full license to exchange but it will license cryptocurrency firm OSL Digital Securities, a unit of the Fidelity BC-backed 0863.HK group, OSL.

Cryptocurrency Regulation Around the World

One of the most common actions identified in the jurisdictions studied was government notification of investment traps in the cryptocurrency market. Such warnings, especially those issued by central banks, are mainly used to give knowledge on the difference between actual currencies issued and guaranteed by the state and cryptocurrencies that are not.

Some jurisdictions have gone further, imposing restrictions on investing in cryptocurrencies, the scope of which varies from jurisdiction to jurisdiction. Some (Algeria, Bolivia, Morocco, Nepal, Pakistan, and Vietnam) prohibit all activities with cryptocurrency. Qatar and Bahrain take a slightly different approach in that they prohibit their citizens from participating in activities involving cryptocurrency at the local level but allow citizens to do so outside their borders. 

Some countries have not prohibited their citizens from investing in cryptocurrency. They impose indirect restrictions by prohibiting financial institutions within their borders from facilitating crypto transactions such as Bangladesh.

Some jurisdictions are trying to go one step further and develop their cryptocurrency systems. This category includes a diverse list of countries such as the Marshall Islands, Venezuela, member states of the Central Bank of the East Caribbean (ESCB), and Lithuania. Besides, several jurisdictions have warned the public about the dangers of investing in cryptocurrencies. They have found that the cryptocurrency market is too small to cause sufficient concern to warrant current regulation and prohibition (Belgium, South Africa, and the UK).