Hong Kong Shifts Gears: SFC to Centralize Virtual Asset OTC Regulation Amidst Evolving Market.

Hong Kong is making a significant move to centralize the regulation of virtual asset over-the-counter (OTC) services, with the Securities and Futures Commission (SFC) now taking the lead. This update, reported by Odaily and highlighted by Binance News, marks a pivotal shift from earlier proposals.

Initially, Hong Kong's Financial Services and the Treasury Bureau suggested the Customs Department handle licensing and oversight. However, Financial Secretary Christopher Hui revealed that concerns about regulatory arbitrage from legislative council members prompted a re-evaluation.

Further complexities arose as authorities discovered the market's operational model was more intricate than first thought, with some OTC institutions also offering custodial services. This revelation solidified the decision to designate the SFC as the primary regulator for these transactions, ensuring a more comprehensive and robust oversight.

For services that incorporate banking elements, the Hong Kong Monetary Authority (HKMA) will step in as the frontline regulator, ensuring a multi-pronged regulatory approach.

Hui emphasized that regardless of whether virtual asset service providers ultimately require licensing, the government is committed to setting clear expectations and allocating sufficient regulatory and other resources to efficiently manage license applications. This commitment aims to foster a well-regulated and secure environment for the burgeoning virtual asset market in Hong Kong.