The Hong Kong Legislative Council has I pass a new amendment to its anti-money laundering (AML) and terrorist financing system to include virtual asset service providers.
The latest legislation will establish a new licensing regime for virtual asset service providers, which will take effect on June 1, 2023. The new amendment will subject crypto exchange service providers to the same legislation that traditional financial institutions follow. .
It means that virtual exchanges looking to open a business in Hong Kong will have to go through strict AML guidelines and investor protection laws before being granted an operating license. Unlike most other regulators in the world, Hong Kong has used the FTX collapse as a way to mitigate the regulatory risks associated with centralized exchanges.
As a result of the FTX crypto exchange crash, regulators around the world have faced public outrage for failing to protect retail investors. There has been a growing demand for crypto exchanges and service providers to be brought under the law and subject them to strict investor protection and AML requirements.
Related: Could Hong Kong really become China's proxy in crypto?
In a recent conference, the chief executive of the Hong Kong Monetary Authority, Eddie Yue hinted at possible investor protection regulations coming soon to the nation. The recent change in legislation has propelled the nation to become the first to act on the pressing issue of investor protection.
Hong Kong has been actively working to establish a well-thought-out regulatory foundation for the nascent crypto market. The Hong Kong government published a policy proposing a regulatory framework and risk-based regulatory direction in October under the title "Policy Statement on Virtual Asset Development." The government has suggested a series of pilot projects to test and improve the technologies underlying virtual assets.
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