Hong Kong is on the way to leadership in the crypto industry. New procedure for licensing

In the global turmoil in the cryptocurrency market, Hong Kong is actively gaining momentum in regulating this sector. "Our goal is to protect investors and manage risks," says SFC Chairman Julia Leung.

Therefore, starting June 2023, all crypto platforms in Hong Kong must have an SFC license. Hong Kong cryptocurrency market operators can only cooperate with virtual asset service providers (VASPs) registered with the SFC.

Licensing retail trade in large coins such as bitcoin and ether is a strategic step in positioning Hong Kong as a leading cryptocurrency hub. However, which operations are subject to licensing? Who has to obtain a license, and what requirements will be imposed? What is the process of getting a permit, and what are the peculiarities for retail investors? What happens if you fail to submit an application to the SFC for licensing within the established deadline? We will discuss these essential details below.

What happens if you do not apply to the SFC by February 29, 2024?

In short, a VASP will have to close its virtual asset exchange business in Hong Kong by May 31, 2024, or within three months of the issuance of the refusal notice (whichever is later).

What operations need to be licensed?

• Regular offers to buy or sell virtual assets leading to a binding transaction

• Frequent representation of persons negotiating or concluding transactions with virtual assets

• Services that involve the transfer of money or virtual assets to the provider's possession

Who will be licensed?

• Cryptocurrency exchanges established in Hong Kong

• Foreign platforms that promote their services in the Hong Kong market

After this terminology, let's dive into the specifics. The SFC has prepared a list of requirements that must be met to obtain a crypto license:

• a Hong Kong or international registration by Hong Kong law

• at least two responsible persons - Responsible Officers (ROs), on staff

• competence of the management in the field of cryptocurrencies (there is a guide on how to determine this)

• at least one of the employees has a local registration

• compliance with a strict anti-money laundering (AML) policy

Let's summarize and define the five main steps of obtaining a crypto license in Hong Kong

1. Official registration of a legal entity and fulfillment of the stated requirements of the regulator to obtain a license

2. Registration of the relevant application with the SFC and payment of the fee (the amount varies from $1,790 to $4,740)

3. Testing of the company for compliance with the requirements of the supervisory authority and the legal provisions of the Hong Kong jurisdiction

4. Audit of the company's ultimate beneficiaries for compliance with the requirements of the regulator

5. Issuance of a license permit for cryptocurrency activities

The innovations position Hong Kong as a safe harbor for financial transactions with digital assets, turning it into the world's leading crypto hub. This progressive step has not gone unnoticed. Johnny NG, a Hong Kong Legislative Council member, has already opened the door for global crypto companies. "I invite all global virtual asset trading operators, including Coinbase, to Hong Kong. Please do not hesitate to contact me, and I will be happy to help."

The market response to this decision was swift and positive. Bitcoin has already seen a 1.3% rise to $27,308.03, while Ethereum is up more than 1.69% to $1,851.92.