Hong Kong legislators approved amendments to the anti-money laundering law to subject crypto exchange firms to strict compliance with the new licensing regime. The country’s legislative council passed amendments introduced to the existing anti-money laundering (AML) law to expand coverage to the providers of virtual asset services.
Strict Licensing Regime
The new legislation introduces a strict licensing regime for crypto exchange providers starting June 1, 2023. The amendment seeks to subject crypto exchange firms to similar provisions that govern traditional financial institutions (TradeFi).
The amended provisions mandate virtual assets exchanges seeking to start a shop in Hong Kong to satisfy the rigorous AML guidelines. Besides, crypto exchanges will need compliance with the investors’ protection regulations to secure operating licenses.
Reasons for Amending Legislation
Hong Kong has leaped ahead of other regulators stuck in the deliberation of granting oversight authorities to existing watchdog agencies. Citing the recent illustrations of billions of digital wealth trapped or reportedly lost in the embattled FTX empire, the Hong Kong legislative council approved the amendments to mitigate risks inherent in centralized custodial exchanges.
Also read:The decision by the country’s legislative council to subject crypto exchanges to strict licensing regimes is triggered by the public ire directed towards regulators for their inability to safeguard retail investors. The new legislation honors the loud calls for subjective crypto exchanges and custodial wallets under the regulators’ watch. Consequently, subjecting crypto service exchanges to strict investor protection requirements will help restore trust within the crypto space.
Key Milestone Realized to Protect Investors
The approval of the new provisions affirms the hints by Hong Kong Monetary Authority (HKMA) chief executive Eddie Yue. Yue disclosed in a recently held conference that Hong Kong would soon realize investor protection regulations. The approval of the amendments makes Hong Kong the pioneer in guaranteeing regulatory-backed protection of crypto investors.
The amendment passed by the legislative council gives Hong Kong a regulatory framework to tame the nascent crypto market. Recently, the government published a policy declaration that proposed pilot projects to nurture the virtual assets sector. Consequently, the new legislation crowns previous efforts by HKMA to introduce risk-based regulatory checks.
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