Regulation Shift for Virtual Asset OTC Transactions
In a significant shift regarding the regulation of virtual asset over-the-counter (OTC) transactions, Hong Kong’s government is moving the oversight duties from the Customs and Excise Department to the Securities and Futures Commission (SFC). This decision follows public consultations by the Treasury Department last year, which explored potential regulations for OTC services.
Concerns Raised During Consultations
During these discussions, Treasury Secretary Paul Chan noted that various Legislative Council members raised concerns, particularly regarding the risk of regulatory arbitrage entailed in such a framework.
Complex Market Structure
Chan emphasized that the market structure turned out to be far more intricate than expected, as many OTC providers were not just offering trading services but also engaged in custody operations for digital assets. In light of these complexities, there is now a push for a more centralized approach to regulation.
New Regulatory Framework
Under the new proposal, the SFC will play a central role in regulating virtual asset services, with the Hong Kong Monetary Authority (HKMA) also stepping in as a primary regulator when banks are involved in these transactions. Xu Zhengyu elaborated that, regardless of the final licensing status of virtual asset service providers, the regulatory framework would be well-resourced to handle the influx of license applications, ensuring efficient processing and oversight.
