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Hong Kong virtual currency supervision can grab both hands
On February 2, 2024, Xu Zhengyu, director of the Hong Kong Financial Affairs and Treasury Bureau, said that the government believes that there is a need to include the virtual currency off -site exchanges (OTC) into supervision, and to consult with the proposed regulatory framework in the short term, hoping citizens to expect the publicAnd enthusiastically express their opinions.
How short is this short in the short term, we are not sure, but the certainty is:Virtual currencyOTCIn Hong Kong, it will usher in the era of compliance.
As an old international financial center, Hong Kong has been relatively open and tolerant of the new attitude towards virtual currency.Hong Kong did not regard virtual currency as a legal currency or financial instrument, but defined it as a “virtual asset”, and took corresponding regulatory measures according to its activities and risk.
At present, Hong Kong’s supervision of virtual currency is mainly concentrated in two aspects: one is the supervision of the virtual asset trading platform (VASP), and the other is the supervision of out -of -field transactions (OTC) merchants.
According to the “Licensing System for Providing Virtual Assets Trading Services” issued by the Hong Kong Securities and Futures Affairs Supervision Committee (SFC) in June 2023, all platforms that provide virtual asset transaction services in Hong Kong need to apply to SFCPermit and comply with relevant laws and regulations and regulatory requirements.At present, there are two licensed virtual asset trading platforms (Hashkey and OSL) in Hong Kong upgraded through licenses, which can provide retail investors with Bitcoin (BTC) and Eth (ETH) trading services.In addition, many platforms are applying for permission or in a transition period.SFC said that according to market conditions and investor protection needs, reviewing and improving the license system from time to time.
Earlier, Lawyers Mankun wrote a number of articles related to Hong Kong licensed transaction supervision “One article Speaking | Hong Kong Virtual Currency Exchange’s licenses holding system” and “One article explain 丨 How to compliance in Hong Kong?》, We mainly talk about the supervision of virtual currency OTC merchants in this article.
What is the Hong Kong virtual currency OTC merchant?
Virtual currency OTC merchants, or institutions or individuals that provide over-the-the-counter services.Overseas transactions refer to the buying and selling of cryptocurrencies conducted on platforms or channels outside the exchange, which usually involves cash or other legal currencies.Overseas transactions have the following forms:
· Online platform:Through network tools such as websites, social media, and chat software to connect the buyers and sellers to provide services such as matching, hosting, liquidation, etc.
· Offline shopsTheProviding cash exchange cryptocurrencies or other services in physical stores usually does not require real -name authentication or other compliance requirements.
· ATM machine:Self -service equipment set up in public places can be purchased or sold with cash or bank cards.
According to a rough estimate of the preliminary observation of the Hong Kong law enforcement organs, there are about 200 physical virtual asset -site trading stores (including off -site trading stores operated by automatic tellers) in Hong Kong, and about 250 online active virtuals are actively providing virtuals on the Internet.Asset trading service provider.
In most OTC merchants’ offline stores and ATM machines, they generally do not need KYC. The transaction only takes a few minutes to complete. This provides a convenient, flexible and privacy way for cryptocurrency users, especially welcomed by mainland users.
Why do you say that?Although China clearly does not allow the business of virtual currency exchanges in China, it is amazing that according to CHAINALYSIS data, mainland China is still the fourth largest cryptocurrency trading market in the world.However, due to mainland policies, bank cards caused by buying and selling virtual currencies have been frozen. Therefore, more and more old players in currency circle will choose to go in and out of OTC merchants when they travel freely in Hong Kong.
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Why supervise OTC?
There are two sides of everything. OTC merchants are also abused by criminals when providing users with convenient and privacy in and out of gold channels.On September 5, 2023, the Hong Kong police arrested 6 men involved in the case. One of the person involved was Chen Xiaolong, chief of the chief executive of virtual currency OTC service providers.
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The suspect of the JPEX case was arrested by the Hong Kong police, the source of the picture source Techub News
On the whole, there are currently three problems in virtual currency OTC.
· Lack of effective supervision:At present, Hong Kong does not have a clear regulatory framework and requirements for virtual currency OTC merchants, which has led to some irregular and illegal behaviors.For example, some OTC merchants suspected of fraud, money laundering, terrorist financing and other criminal activities have harmed the interests and social order of investors.Some fraud gangs attract retail investors’ funds through related OTC trading stores.
· Lack of industry standards:At present, the OTC merchants in Hong Kong do not have a unified industry standards and self -discipline mechanisms, and their own politics have led to the chaos and unfair competition in the market.For example, in order to attract customers, some OTC businesses provide conditions such as high returns, low costs, and infinite quotas to induce users to conduct irrational transactions.In addition, some OTC merchants also have problems such as opaque information and low service quality, which affects the credibility and efficiency of the market.
· Lack of user protection:At present, OTC merchants in Hong Kong do not provide users with sufficient protection measures and relief channels. Users often cannot get timely and effective solutions when they encounter problems.For example, some OTC merchants did not provide identity verification and risk prompts to users, nor did they not establish a comprehensive complaint handling and dispute resolution mechanism. Users are difficult to account for liability or claims when they encounter fraud, delay, and errors.In addition, some OTC merchants have not fully protected the privacy and data of users, causing user information to leak or be abused.
How to supervise virtual currency OTC in Hong Kong?
On February 8, 2024, the Hong Kong Government set up a public consultation on the establishment of a licensing system for the issuing system of virtual asset market transaction services (OTC) providers.By combing the legislative proposal, we combed relevant key matters for everyone.
1. Which OTC business will be supervised?
(1) According to the legislative proposal, all virtual assets outside trading services, whether through offline physical stores (including automatic tellers) or online website services, need to be supervised.
(2) Types of virtual assets that can be bought and sold for customers can cover at least one virtual asset trading platform for the Securities Regulatory Commission’s licensing to be traded for retail investors transactions, and the implementation of the issuer of the issuer of the proposed stable coin issuerLater, a stablecoin issued by the issuer issued by the Hong Kong Financial Administration (HKMA).
(3) Based on the principles of “the same business, the same risk, and the same rules”, if the licensee provides a legal currency remittance service, it must apply for a license to the business operator.Licensed operators are not allowed to provide other services, including any form of virtual asset consultants or referral services, providing virtual asset derivatives or other financial products (including but not limited to pledge, lending and deposit transactions).
2. What conditions can applyOTClicense?
(1) In order to ensure that the applicant’s license applicant has sufficient connection with the local area so that the authorities can make effective supervision and supervision, the applicant must be a company (i) a company that is established in Hong Kong and has a fixed business location, or (ii) is established elsewhere elsewhere.Companies registered in Hong Kong in accordance with the “Company Regulations”.
(2) If the OTC service provider uses the form of a physical store, the applicant must provide a suitable operation office.If you provide services online, you must provide the address, mailing address of the local manager’s office, and information on the local accounts and location in the local manager.
3. Which institution is responsible for the compliance license?
(1) If anyone engages in the business of any virtual asset spot trading services in Hong Kong, it must apply for the Customs Customs Captain’s license, and it must meet the appropriate candidate criteria and other customs officers of customs.The trading operator of the licensed virtual asset market must comply with the provisions of the funding of money laundering and terrorist funds and other regulatory requirements set by the “Campaign of Money Laundering”.
(2) Wallet registration system: The licensee must apply to the customs chief of the customs and register all the wallets used for its operation, and ensure that the wallet list is constantly updated.In order to reduce the risk of reducing money laundering and terrorist funds, the licensed person will only be allowed to transfer such virtual assets from its registered wallet to customers to provide a wallet with/or control certification.
(3) Dating license: Successful applicants can get a two -year license, and can apply for a two -year renewal of the license in Customs Customs.
4. What is the cost of illegal?
(1) Anyone who is engaged in regulatory virtual asset -off trading services if no one holds a license. Once the public prosecution procedure is convicted, a fine of 1 million yuan and imprisonment may be punished for two years.
(2) Any advertisement on non -licensed transaction services provided by non -licensed assets as well as a crime is a crime. It may be fined at the 5th level (currently 50,000 yuan) and imprisonment for six months.
(3) If the licensee violates the legal cracking down on money laundering and terrorist funds, it may be fined 1 million yuan and two years after the public prosecution procedure is convicted.In addition, if the licensee is improper (such as violating other regulatory requirements), administrative penalties can be shall be imposed, including temporarily revoking or revoking licenses, condemnation, or ordering to make corrections, and/or fines (not more than 500,000 yuan).
(4) The current crimes related to fraud and misleading activities under the “Regulations on Money Laundering” will be applied to traders holding licenses of virtual assets.Anyone who involves virtual assets to make fraud or fraud, which is a crime, and can be fined 10 million yuan and imprisoned for ten years.In addition, anyone who makes fraud or ignores the truth of the truth is a crime that enables others to conduct transactions involving virtual assets. It can be fined 1 million yuan and seven years of imprisonment.
Conclusion
As an innovative financial tool, Hong Kong’s supervision of virtual currencies is to find the best solution between balanced market development and investor protection. By establishing a reasonable and effective regulatory framework, Hong Kong can promote the healthy development of the virtual currency industry. At the same time,Protect public interests and financial stability.
The legislative suggestions of Hong Kong’s virtual currency OTC are only the beginning of compliance supervision. For practitioners in the currency circle, the policy seems to have tightened the policy, but in fact, the rules of the game are clearer.After all, the healthy development of an industry cannot be nesting forever in a dark small corner, so that the sunlight will come in, so that everything can be brighter.
