On 20 February 2023, the Hong Kong Securities and Futures Commission (SFC) issued a 361-page consultation paper on the proposed requirements for virtual asset trading platforms.  

The consultation paper is issued in line with the passage of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 in December 2022.  Under the Bill, a new licensing regime for centralised virtual asset trading platforms will come into effect on 1 June 2023.  The new regime requires all centralised virtual asset trading platform carrying on business in Hong Kong or actively marketing to the public in Hong Kong will need to be licensed by the SFC.

Consultation period will end on 31 March 2023.  The consultation paper can be found here.  

The consultation paper lists out the proposed regulatory requirements for licensed trading platforms, and provides more information about the transitional arrangements under the new regime and other implementation details.  The proposed regulatory requirements for virtual asset trading platforms would be similar to those for licensed securities broker and automated trading venues, in particular, covering areas such as safe custody of assets, Know-Your-Client (KYC), anti-money laundering/counter-financing of terrorism (AML/CFT), conflicts of interest, admission of virtual assets for trading, prevention of market manipulative and abusive activities,  accounting and auditing, and risk management.

SFC is seeking the views as to whether virtual trading platforms should be able to serve retail investors, and if so, the additional measures required.  Some of the additional measures proposed in the consultation paper includes onboarding requirements, governance, token due diligence, disclosure obligations, insurance / compensation arrangement.

Similar to all things in this market, time is of the essence.  Applicants for virtual assets trading platform licence would need to review their application materials, and operators without any licence in Hong Kong or do not intend to apply for any licence in Hong Kong should review their operations.

If you wish to find out more about how we can help or any issues raised in this article, please contact:

Alfred Leung, partner (alfredleung@hkytl.com).

This article is general in nature and is not intended to constitute any legal advice.  Please seek professional advice before taking any action in relation to matters dealt with in this article.