Hong Kong Securities Regulatory Commission's semi-annual examination: 35 activities to discuss virtual assets and issue new licenses for exchanges

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Author丨Carl

Editor丨Marco

In terms of promoting the compliance development of the virtual asset industry, the Hong Kong Securities Regulatory Commission handed over the answer sheet for the first half of the year.

The Hong Kong Securities Regulatory Commission recently released its latest quarterly report, listing the new licensing system for virtual asset trading platforms as the headline of regulatory optimization measures. In terms of communication and education, the Securities Regulatory Commission participated in more than 35 activities to discuss virtual assets, etc., and through TV stations, educational activities, Publications and other forms of investor education to the public.

It can be seen from public media reports that Leung Fung-yee, CEO of the Hong Kong Securities Regulatory Commission, frequently attends events to promote and interpret the licensing system of virtual asset trading platforms. She said that cryptocurrency trading is an important part of the virtual asset ecosystem, and the Securities Regulatory Commission supports related distributed ledger This technology and the concept of responsible innovation.

1. 35 events involving the topic of virtual assets

On August 23, the Hong Kong Securities and Futures Commission issued the "Quarterly Report from April to June 2023" (hereinafter referred to as the "Report"), which mentioned "virtual assets" 26 times. In the sector, "virtual assets" run through almost all the work of the China Securities Regulatory Commission.

The report pointed out that in terms of speech activities, senior executives of the China Securities Regulatory Commission participated in more than 35 local and international events during the quarter, and gave speeches on topics such as virtual assets, publicized and interpreted Hong Kong’s new licensing system for virtual asset trading platforms, and deepened Industry awareness of the new regime.

On April 12 this year, global Web3.0 practitioners gathered at the "2023 Hong Kong Web3 Carnival". Cai Zhonghui, interim director of the Intermediary Department of the Hong Kong Securities Regulatory Commission, delivered a speech at the conference and said that the potential of Web3 and virtual assets will be released. Starting in June, virtual asset trading platforms will be licensed by the China Securities Regulatory Commission to protect investors. Cai Zhonghui called on relevant parties in the market to actively participate in discussions and engage in constructive dialogue with the China Securities Regulatory Commission.

On April 27, Leung Fung-yee, chief executive of the Hong Kong Securities Regulatory Commission, participated in a one-on-one interview with Bloomberg. She said that the key tasks of the Securities Regulatory Commission include the licensing system of virtual asset trading platforms, which is the third generation of Internet (Web3) ecosystem. An important cornerstone of the SFC, the SFC supports related distributed ledger technology and responsible innovation concepts.

Leung Fung Yee also participated in two events held in Bangkok, Thailand in June.

On June 13, Leung Fung Yee gave a keynote speech on the theme of "Hong Kong's New Virtual Asset Licensing System". She said that cryptocurrency trading is an important part of the virtual asset ecosystem, and Hong Kong's regulatory framework fully covers all aspects of the public and virtual assets interaction to ensure that investors are protected while taking into account the risks faced by financial institutions.

The Hong Kong Securities Regulatory Commission has expressed support for fund tokenization at several conferences.

On June 5, Liang Fengyi participated in the 16th annual meeting of the Hong Kong Investment Fund Association and delivered a speech. She expressed her support for the tokenization of funds to improve the efficiency of the industry.

According to media reports, Elizabeth Wong, the head of the SFC’s fintech division, revealed at a separate meeting in June that the SFC is actively studying the benefits of tokenization while ensuring that “if tokenization is used, the situation for investors will not change.” worse,” he said: “We support tokenization and are happy to discuss with the industry about tokenizing public funds.”

In addition, the report also pointed out that in order to promote communication between banks and the virtual asset industry and promote banks to provide banking services to licensed virtual asset trading platforms, the China Securities Regulatory Commission and the HKMA held two roundtable meetings.

Several heads of virtual asset institutions told Techub News that practitioners generally encounter the problem of being unable to open bank accounts in Hong Kong. This is a current pain point in the industry. Although the Hong Kong government has been promoting multi-party communication and exchanges, it still takes time. to solve.

Xian Diyun, the alternate CEO of ZhongAn Bank, said that the key to this issue is whether the bank understands the specific industry that Web3.0 companies are engaged in, and the bank is worried about money laundering and problems with business counterparties. ZhongAn Bank embraces Web3.0, hopes to support the development of this industry, and explores some norms.

2. The new license system will be implemented within 10 months

In the "Summary" on the front page of the report, "virtual assets" is listed under the headline "Regulatory Optimization Measures". The relevant guidelines for these operators, the new licensing system has come into effect on June 1, 2023.

Industry analysts said that the speed of the Hong Kong Securities Regulatory Commission in promoting the new licensing system of virtual asset exchanges is unprecedented. From Hong Kong’s decision to embrace Web3.0, to the implementation of the new licensing system, and to the adoption of virtual asset exchanges It took less than 10 months to get the license.

On October 31, 2022, the Hong Kong Special Administrative Region Government issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong". Licensing regime for service providers.

On June 1, 2023, the new licensing system for Hong Kong's virtual asset exchange officially began, and the China Securities Regulatory Commission announced that it will start accepting applications for new licenses.

Prior to this, the China Securities Regulatory Commission issued a consultation summary and "Guidelines Applicable to Virtual Asset Trading Platform Operators" in May, explaining the standards that the new virtual asset trading platform licensing system should meet, including safe custody of assets, separation of customers assets, avoiding conflicts of interest, and network security.

In order to help the industry understand the new licensing system, the Hong Kong Securities Regulatory Commission has also issued a series of publications, including the "Licensing Manual for Operators of Virtual Asset Trading Platforms", a circular on the implementation details and transitional arrangements of the new system, and relevant Frequently Asked Questions on Licensing and Conduct Matters, etc.

The Hong Kong Securities Regulatory Commission website has newly set up a special page, which integrates various practical materials, such as online application forms.

On August 3, the Hong Kong virtual asset exchange HashKey and OSL announced on the same day that they had been approved by the Hong Kong Securities Regulatory Commission to upgrade their No. 1 (securities trading) and No. 7 licenses (providing automated trading services), expanding their business scope from professional investors to retail investors. .

Under the new licensing system, all virtual asset trading platforms in Hong Kong need to be licensed by the Securities Regulatory Commission, while HashKey and OSL have previously held Hong Kong No. 1 and No. 7 licenses, so they can complete the license upgrade through simple procedures, while others The application procedure of the trading platform is relatively complicated.

Through various educational activities, the China Securities Regulatory Commission emphasizes the importance of compliance on virtual asset trading platforms and warns of related risks.

The report pointed out that the Securities Regulatory Commission has strengthened relevant investor education work by accepting TV interviews from Radio Television Hong Kong, and launched a new round of investor education activities with the Investor and Financial Education Committee, a subsidiary of the Securities Regulatory Commission.

On August 7, the Securities Regulatory Commission issued an early warning saying that some unlicensed platforms falsely claimed that they had submitted license applications to the Hong Kong Securities Regulatory Commission, and most of the virtual asset trading platforms accessible to the public were not regulated. The Hong Kong Securities Regulatory Commission will update the list of licensed trading platforms in a timely manner.