The Hong Kong government has designated the Securities and Futures Commission as the main regulatory agency for OTC cryptocurrency trading activities to ensure strict control and transparency in this market.

The initial proposal to regulate OTC cryptocurrency under the management of the Hong Kong Customs and Excise Department received mixed feedback and discovered a more complex market operating model than expected, leading to a transfer to the appropriate regulatory agency.

MAIN CONTENT

  • The Hong Kong Securities and Futures Commission is the main regulatory agency for OTC cryptocurrency.

  • Feedback from the Legislative Council shows concerns about transferring management authority to the Customs and Excise Department.

  • The operational model of OTC cryptocurrency organizations is complex, engaging in both OTC trading and providing custody services.

How is the regulation of OTC cryptocurrency services in Hong Kong carried out?

The Hong Kong Securities and Futures Commission (SFC) is the main unit controlling the current OTC cryptocurrency trading services, ensuring a strict licensing and monitoring process.

Previously, the Hong Kong Treasury proposed that the Customs and Excise Department license and manage OTC cryptocurrency, however, opinions from Legislative Council members showed concerns about transferring this management authority and the possibility of legal evasion. At the same time, OTC organizations not only trade but also provide custody services, creating complexity in regulation. Therefore, the Securities and Futures Commission was chosen as the main regulatory agency to focus and specialize in supervision.

"Regulating OTC cryptocurrency requires coordination and reasonable resource allocation to ensure an effective licensing and management process."
Mr. Xu Zhengyu, cryptocurrency financial expert, 2023

Why is the operating model of OTC cryptocurrency organizations complex?

Most OTC organizations not only carry out buying and selling transactions but also provide custody services, creating a diverse business model that requires deeper management.

In addition to OTC trading, many organizations also operate cryptocurrency asset custody services, necessitating the licensing and supervision to expand the scope to include storage and protection of assets. This complicates the operational model more than initially expected, while increasing regulatory requirements to ensure safety and transparency. Therefore, regulatory agencies need to make coordinated efforts and build a synchronized supervision mechanism.

What role do banks in Hong Kong play in the OTC cryptocurrency management system?

The Hong Kong Monetary Authority (HKMA) is the leading regulatory agency if OTC services involve banking transactions or organizations.

In cases where OTC activities involve banks, HKMA will serve as the direct supervisory agency alongside the Securities and Futures Commission. This clear delineation helps the government ensure better control of financial risks, money laundering, and fraud prevention through the traditional banking system.

"Clearly delineating the regulatory roles among agencies helps enhance the effectiveness of OTC cryptocurrency market management."
Mr. Paul Chan, Hong Kong's Financial Secretary, 2023

How will regulatory agencies support the licensing of cryptocurrency service providers?

The heads of regulatory agencies are committed to providing adequate resources and a favorable environment to ensure a quick, transparent, and fair licensing process.

Mr. Xu Zhengyu emphasized that regardless of whether cryptocurrency service providers ultimately receive full licenses, the regulatory agency will focus resources on processing applications effectively, to facilitate compliance with the law. This is a crucial factor for sustainable market development and attracting reputable organizations to participate.

Comparison table of the powers of related regulatory agencies in Hong Kong

Agency Scope of Management Main Role Securities and Futures Commission (SFC) Cryptocurrency OTC trading Licensing, market activity supervision, processing service applications Customs and Excise Department Initial proposal for OTC cryptocurrency management Not officially authorized, only public consultation Hong Kong Monetary Authority (HKMA) Bank-related OTC Directly manages bank-related transactions, prevents financial risks

Frequently Asked Questions

1. Why did Hong Kong transfer the management of OTC cryptocurrency to the Securities and Futures Commission? Mr. Paul Chan, Hong Kong's Financial Secretary, stated that due to the complex operating model, the SFC has the appropriate expertise to supervise more comprehensively. 2. How does the management of OTC cryptocurrency affect investors? Clear regulation helps protect investors, increases transparency, and reduces the risk of market manipulation. 3. What transactions does HKMA control in the OTC cryptocurrency system? HKMA manages OTC transactions involving banks to prevent financial risks and money laundering. 4. How do OTC cryptocurrency organizations apply for permission? They need to complete the licensing application with the SFC, comply with strict regulations, and undergo thorough checks on their capabilities. 5. What does the diverse operational model of OTC cryptocurrency include? Besides OTC trading, many organizations also provide asset custody services, complicating management.

Source: https://tintucbitcoin.com/hong-kong-giam-sat-ky-quy-giao-dich-otc/

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