The CEO of the Hong Kong Securities and Futures Commission (SFC) recently stated that the next focus will be on regulating virtual asset over-the-counter (OTC) platforms and custodians!
OTC is an important entry point for many high-net-worth users and institutions in Asia to conduct large-scale cryptocurrency transactions, and it is also a gray area for many "money laundering" operations. Once strict regulations are implemented, OTC platforms will be forced to operate in a compliant and transparent manner, and many non-compliant channels may be eliminated.
Custody, as a bridge between DeFi and CeFi, has previously lacked a clear regulatory framework. Recently, Hong Kong has attempted to introduce a "Qualified Custodian" standard. This could enhance institutional participation willingness and is expected to facilitate the safer inflow of traditional financial capital into Web3.
Short-term impact:
Some small and medium-sized OTC channels will voluntarily go offline, affecting off-chain liquidity in the Asia region. Due to tightening compliance, purchasing difficulty may temporarily increase. Investors will be more cautious about their holding paths, and trading volume may temporarily decline.
Medium to long-term impact:
This will help promote the compliance and capital absorption capability of leading cryptocurrencies such as BTC and ETH. It incentivizes Hong Kong to become the first "regulatory oasis" for virtual assets in the Asia-Pacific region, attracting more TradFi capital.
Potential benefiting sectors and projects:
Compliant exchanges: such as Binance, will directly benefit from regulatory trust and user inflow.
On-chain custody & MPC: such as Fireblocks-related tokens, Qredo, aligned with regulatory custody standards, have potential.
Compliant wallets and off-chain identity verification: such as Civic, Polygon ID ecosystem, with increased KYV demand.
Cross-border settlement tools and stablecoins: such as USDC, TUSD, XSGD, with increased compliance scenario usage rates.
