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Hong Kong Crypto Exchanges Will Soon Be Obligated To Follow Regulations

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Cryptocurrencies are finally finding their place in the global financial scene. Cities like Hong Kong have been making progress in the same. As the value of these assets has been surging, people have been veering towards the crypto industry. More people diving into the market has definitely sparked up some hacks and scams. In order to keep this in control, the regulators of different countries have been putting into place new laws and amendments to the existing ones. Hong Kong seems to be heading in that direction.

Regulation Is A Must In Hong Kong Crypto Scene

The Securities and Futures Commission [SFC] of Hong Kong revealed that every crypto exchange in the purview of the city was subject to regulations. In a Fintech Week program that took place on Tuesday, Ashley Alder, the Chief Executive Officer of Hong Kong’s Securities and Futures Commission affirmed that crypto platforms functioning in the city of Hong Kong would be regulated even if they do not trade security tokens.

Elaborating on the same, Alder said in his speech,

“Under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security.”

Last year, the SFC proposed that the crypto platforms were to voluntarily abide by the regulatory framework put forth by the financial watchdogs of the city. However, certain exchanges continued to steer away from this and engaged in operations without keeping in mind the regulations.

Furthermore, the SFC will be initiating a new program with regard to licensing of platforms keeping in mind anti-money laundering schemes. While this is still underway, platforms that aid cryptocurrency trading in the city would be monitored and regulated as soon as the regimes are out and about.

With news pertaining to breach of regulations from across the globe, several governments have been sprucing up their game. BitMEX and OKEx’s latest swim in troubled waters is proof enough that irrespective of their popularity exchanges must abide by rules and regulations. The Hong Kong financial watchdog made it clear that anyone that fails to register their platform or abide by the regulations would be categorized as offenders of the law.

Hong Kong Newspaper Apple Daily Carries Full Page Bitcoin Advertisement Few Days After CEO Was Arrested

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Bitcoin’s reach has gone far and beyond what people expected when it first came to the forefront more than a decade ago. From being considered as a niche virtual asset that would die out quickly to become one of the largest disruptors of the financial market, Bitcoin has certainly pulled its weight over the past few years.

The cryptocurrency’s mainstream appeal has sparked a global interest that has transcended the standards set by traditional banking institutions. Bitcoin’s popularity has surged so much that an advertisement for it was even spotted in a major Hong Kong daily.

Today, on August 24, citizens of Hong Kong spotted a full advert for Bitcoin in the Apple Daily, a popular daily publication in Hong Kong. The advert carried the message ‘Bitcoin will never ditch you, which was probably a rebuttal to major banks who are mired in controversies. The newspaper also printed out Satoshi Nakamoto’s name underneath the quote which has not provided any other leads as of yet.

The advertisement also came with an excerpt stating:

“Bitcoin is digital money. It is not issued or controlled by any government or corporation. Nobody can stop you from transacting on the network and it cannot be shut down. Bitcoin is available to anyone regardless of their nationality, gender, or beliefs. Bitcoin began with the GENESIS BLOCK during the financial crisis of 2009. No, its time is coming.”

https://twitter.com/namshik/status/1297730388798746626?s=20

Despite the size of the ad in the newspaper, it did not inform the users on how and where to procure Bitcoins. The only technical term that was mentioned throughout the ad was related to the genesis block. There were also a few mentions in Cantonese, with a major line saying “Banks, you’re not ditching me today – I’m ditching you.

This was not the first time that Apple Daily has made stirred up so much heat as its CEO Jimmy Lai also played a part in it a few weeks back. On August 10, Lai was arrest by the Hong Kong authorities for allegedly violating the country’s National Security Law. Lai’s arrest led to massive protests by supporters in the streets of Hong Kong, many of them condemning the curbing of the freedom of speech and expression. In the midst of all this controversy, Apple Daily’s stock price shot up by a whopping 1100 percent.

Crypto Firm OSL Receives In-Principle License Approval From Hong Kong’s watchdogs

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The Asian-based cryptocurrency firm, OSL Digital Securities, won the Hong Kong market regulator’s in-principle decision to issue an exchange platform license to operate its crypto-related business in the region.

With this crucial development, the Fidelity-backed BC group is now one step closer to operating as a regulated provider for brokerage and automated trading services, including security tokens. After the latest move, OSL asserted that it would continue to work under the SFC’s regime in a bid to secure a full-provider license in Hong Kong.

Commenting on the authorization, BC Group CEO Hugh Madden stated,

“Securing approval-in-principle for a virtual asset trading platform license in Hong Kong, inclusive of security tokens, underscores our commitment to comprehensively addressing the demands of institutional investors”

In response to growing anti-money-laundering [AML] and know-your-customer [KYC] concerns, Hong Kong’s Securities and Futures Commission expanded its regulatory oversight for cryptocurrency exchange treating them as traditional securities brokerages and allowed these platforms to opt into regulation under its new rules.

Essentially, the “in-principle” decision is the first step of the full authorization process in which the applicant platform is required to satisfy one or more requirements set by the Securities and Futures Commission [SFC] in order to obtain a license.

SFC had unveiled its new set of rules for the cryptocurrency exchanges in November last year. It details how the Platforms must address custody and compliance, in particular with regard to the KYC and AML rules. The published documents also state that exchanges can only offer products to “professional investors.” In addition, they will also be required to file a monthly report to the Commission.

The 61-paged document stated,

“The adoption of the new regulatory framework will enable the SFC to formulate its future
regulatory strategy for virtual assets through close supervisory interactions with an
evolving and dynamic industry.”

The exchanges will need the regulator’s approval for offering new products. Besides, SFC does not consider direct peer-to-peer platforms for licensing. Interestingly, OSL was the first and the only platform to apply for the license.

Bitcoin ATM ‘Loopholes’ Exploited in Hong Kong, Trio arrested

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Automated Teller Machines [ATMs] has acted as the backbone of the retail payments landscape for over fifty years. Acting as a physical access point, ATMs have now made its way to the digital age money space we now know it as the cryptocurrency industry. Over the years, Bitcoin ATMs have sprung up at a highly impressive rate. And with it, the crimes.

In the latest development, the Hong Kong authorities reportedly arrested three persons linked with the alleged siphoning off $226,000 in Hong Kong dollars from six Bitcoin ATMs in 11 transactions. The police suspected that the arrested individuals are the”core members” of a “larger syndicate”.

According to the South China Morning Post report, the three males arrested were between 26 and 55 years of age. The two platforms reportedly suspected foul play and exploitation of “loopholes” in the Bitcoin ATMs after noticing cash withdrawals. The authorities were able to arrest the trio two days after cryptocurrency exchanges had filed a report.This development was first of its kind in the Mong Kok region

Following the arrest, the Superintendent of Hong Kong’s Cyber Security and Technology Crime Bureau [CSTCB], Wilson Tam reportedly stated,

“I cannot reveal what the loopholes are. But any bitcoin transaction needs verification. Maybe the ring bypassed the verifying process before taking the money.”

Tam further revealed to have offered to the two cryptocurrency companies to upgrade their systems.

Consistent growth of Bitcoin ATMs

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According to the Bitcoin ATM tracking website Coin ATM Radar, there were a total of 9,106 Bitcoin ATMs in the world while 52 of them are in Hong Kong. Interestingly, since the start of the year, Bitcoin ATM installations have doubled.

Increasing criminal activities tied to Bitcoin ATMs

While the expansion of the Bitcoin ATM marketplace has been nothing short of remarkable, it is the soaring criminal activity leveraging this space that has become a cause of concern.

Across the Pacific, Bitcoin ATMs in the US sent more funds to high-risk cryptocurrency exchanges than low-risk exchanges in 2019. This was found by a recent report by Cipher Trace, the percentage of funds from the US-based Bitcoin ATMs sent to this category of exchanges had grown exponentially.

According to the crypto-analytic firm, high-risk exchanges are classified as those which have a record of nefarious activities known for facilitating criminal activities and money laundering. And it was also found that as high as 8% of the US Bitcoin ATM payments are sent directly to high-risk exchanges.

Dismantle of Bitcoin ATM operation 

In another development, the U.S. Department of Justice [DOJ] last month revealed to have taken down a Bitcoin ATM operation worth $25 million. It also reportedly seized 17 machines along with some cryptocurrencies from a man who was not licensed for Bitcoin ATM operations.

The perpetrator, Kais Mohammad, further admitted laundering of millions of dollars of Bitcoins as well as cash

Hong Kong Hedge Funds Consider Pulling Out as Regulations Tighten

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Traders and fund administrators in China are panicking after the Chinese Communist Party has approved a decision to enforce national security laws intended to scare away foreign investors. Hong Kong hedge funds are exploring the possibility of shutting down their operations in the Asian financial hub.

Hong Kong is an important Asian spot whose main function is to generate investment income. Unfortunately, fund managers and traders are now worried that the sector might be the center of attention in China after the communist party approved the plan to deploy the national securities laws.

Notably, the securities laws are targeting what is known as “subversion of state power” or “interference” from foreign nations. However, if Hong Kong hedge funds were to withdraw operations, it would be at risk due to its renowned reputation as the world’s top target.

Besides, investors are scared of limitations to free internet access, social media freedom, acquisition of visas, and the capital control rates, said a top investment officer via FT.

Nonetheless, Hong Kong’s Chief Executive officer Carrie Lam, stated that people worried about the new law should wait for more information. She adds that the rules should not harm anyone as Hong Kong is a free society.

Singapore expected to overtake Hong Kong ‘s dominance of hedge funds?

As stated by FT, Hong Kong hedge funds command roughly $91 billion assets more significant than hedge funds in Australia, Singapore, and Japan combined.

Nevertheless, a third of US businesses in Hong Kong were contemplating moving them out. The business insider stated that analysts informed them that Singapore was expected to overhaul the city as operations start deviating from Hong Kong.

In conclusion, Jeffrey Halley, a senior market analyst in Asia – pacific said that if Hong Kong is initiating Chinese laws secretly then, it makes hedge funds feel insecure operating in Hong Kong. Furthermore, he stated that if businesses didn’t want to work under Chinese laws, they could move to Singapore.

East Asia Stablecoin Suggested by Top Chinese Political Advisors

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On May 21, Chinese officials proposed stablecoin in East Asia during a national session. The regional stablecoin will be backed by four major fiat currencies and facilitate trade between China , Korea and Japan.

A member of the Chinese People’s Political Consultative Conference Shen Nanpeng, who is also a global managing partner at Sequoia Capital, suggested regional cryptocurrency during Thursday’s national session. The crypto would be backed by major fiat currencies such as the Japanese yen, the Chinese yuan, the Hong Kong dollar, and the won Korean won.

East Asia stablecoin to cross-border transactions 

The purpose of the proposed East Asia stablecoin is to ease trade and cross-border settlements in the East Asia region. Moreover, the digital currency would massively cut down the currency conversion expenses, reduce time taken to make cross-border settlements, and most importantly act as a litmus test for other state backed digital currencies.

Additionally, the east Asia stablecoin will also help in economic recovery efforts post coronavirus pandemic, by reviving trading activities as per the proposal. Although such digital currencies are not blockchain-based, they are similar to stablecoins such as Tether and USDC. Same as a stablecoin, a national cryptocurrency must maintain equality with the fiat they are pegged to.

Hong Kong recommended as ideal regional link

Furthermore, the digital currency proposal includes creating a regulatory sandbox and expand the system to Hong Kong as time goes; to refine cross border transactions within the region. The proposal recommends Hong Kong as the  main financial entrance and links mainland China to the other countries in Asia. Per the proposal, 70 percent of trans-boundary  renminbi transactions are processed there.

Hong Kong can make the ideal regulatory zone for the east Asia stablecoin. Hong Kong’s watchdog developed a licensing structure to regulate digital currency transactions and cryptocurrency trading platforms back in November 2019. Currently, the Hong Kong regulator has licensed 12 entities to operate in the metropolitan area.