The Securities and Futures Commission (SFC) of Hong Kong has released new regulatory rules for Bitcoin and cryptocurrency exchange in the country. The announcement was made public at a financial tech event held on 6 November by Ashley Alder, Chief Executive. The SFC first laid down guidelines for cryptocurrency funds and digital exchanges in November of 2018.
Improved Regulation and Prevention of Fraud
According to the announcement, the revised set of regulations would allow for cryptocurrency exchanges to receive operating licenses. The revised framework also demand digital exchanges to follow all necessary framework in regards with Know Your Customer (KYC) and Anti-Money Laundering rules.
As per the revised regulations, digital currency operators are required by law to act in accordance with the KYC requirements. Every step must be taken to ensure proper identification of the clients, a thorough analysis of each and every client’s financial background, their investment history and objectives. Digital exchanges can now only provide products for sale to professional investors and are required to file a monthly update report to the SFC.
These exchanges can only make changes to existing products and deliver new products with approval from the regulator. Exchanges are also required to not possess more than 2% of the digital funds in e-wallets with the insurance of every asset. Non-custodial exchanges or any platform that provides only direct P2P service for transactions would not get their license applications approved.
Chief Executive of the SFC, Hong Kong, Ashley Alder, stated that crypto exchanges in the country had earlier been devoid of regulations since a major portion of the digital assets traded on these exchange platforms weren’t considered as securities.
The announcement has received mixed reviews with some exchange platforms welcoming regulation as it would allow for license exchanges to segregate themselves from unlicensed competitors and others favoring to go unnoticed.