The Hong Kong Securities and Futures Commission (SFC) issued a statement today reminding the public that the transition period for virtual asset trading platforms operating in Hong Kong will end on June 1, 2024. By that time, all virtual asset trading platforms must obtain a license from the SFC under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615) (AMLO) or be considered as "deemed licensed" virtual asset trading platform applicants. Any operation of virtual asset trading platforms in violation of the AMLO will constitute a criminal offense, with the SFC taking appropriate legal action.
Investor Tips:
The SFC urges investors to:
- Trade only on virtual asset trading platforms licensed by the SFC.
- Check the "List of Licensed Virtual Asset Trading Platforms" on the SFC website to confirm whether the platform being used is officially licensed.
Additionally, investors should note:
- Applicants considered as "deemed licensed" virtual asset trading platforms are not officially licensed yet.
- These platforms, operating in Hong Kong before the implementation of the new regime, have committed to enhancing their policies, procedures, systems, and controls to meet regulatory requirements but must still demonstrate their effectiveness.
Tips for Virtual Asset Trading Platform Applicants:
Applicants considered as "deemed licensed" virtual asset trading platforms and their ultimate owners must:
- Fully comply with all SFC regulatory requirements and licensing conditions.
- Avoid actively promoting services or engaging in business relationships with new retail clients until officially licensed.
The SFC reminds all virtual asset trading platforms and their ultimate owners to:
- Comply with all applicable laws and regulations, including preventing Mainland Chinese residents from using their virtual asset services.
- Take all necessary measures to ensure that their controlling entities and related parties comply with all laws and regulations.
Temporary Arrangements and Onsite Inspections:
The deemed licensed arrangement is temporary and aims to balance investor protection and market development. If any breaches of key investor protection regulations are found, the SFC will promptly reject the relevant license applications.
In the coming months, the SFC will conduct onsite inspections of virtual asset trading platforms continuing their applications to determine their compliance with regulatory requirements, with a particular focus on client asset protection and "know your customer" procedures. The inspection results will influence the licensing application process, and any breaches of key regulatory requirements will result in swift rejection and other regulatory actions.
Notes:
Under the AMLO, anyone operating a virtual asset service business in Hong Kong or representing that they operate such a business must apply for an SFC license. Virtual asset trading platforms operating in Hong Kong before June 1, 2023, can continue to provide relevant services from June 1, 2024, provided they meet the conditions of being deemed licensed and are recognized by the SFC.
The public should be aware that applicants considered as "deemed licensed" virtual asset trading platforms have not yet obtained official licenses and may ultimately not be licensed. Should an application be rejected, the platform must cease operations in Hong Kong, and the SFC may include it on the "List of Closed Virtual Asset Trading Platforms." Therefore, investors should regularly consult this list.
Applicants considered as "deemed licensed" must hire external assessment experts to comprehensively evaluate their policies, procedures, systems, and controls to ensure compliance with SFC regulatory requirements. If an application is rejected, the SFC will require the platform to submit a plan to ensure an orderly cessation of business and protection of client interests.
