Hong Kong crypto regulations are set to take effect in 2023
Hong Kong has emerged as a highly appealing global hub for cryptocurrency enthusiasts. The 2022 Worldwide Crypto Readiness Report ranks Hong Kong as the leader in the number of blockchain startups, surpassing Switzerland and the United States. The jurisdiction is actively promoting the adoption of cryptocurrencies and has implemented various measures to foster crypto innovation. To reinforce its position in the virtual asset industry, the Hong Kong government has allocated $50 million to support the development of the Web3 ecosystem. However, individuals intending to establish a cryptocurrency venture in the jurisdiction should take note of the recent Hong Kong crypto regulations 2023 that are set to take effect this year, as well as the government’s efforts towards creating a well-defined and comprehensive regulatory framework.
Hong Kong 2023 crypto regulations context
Recently, the Hong Kong Legislative Council has passed amendments to the Anti-Money Laundering and Terrorist Financing Act that introduce virtual assets (VA) and require all virtual asset service providers (VASPs) to obtain mandatory licenses from the Securities and Futures Commission (SFC). To adhere to regulatory obligations, crypto businesses in Hong Kong must implement anti-money laundering (AML) and counter-terrorist financing (CTF) measures such as customer due diligence (CDD), transaction monitoring, and verification of politically exposed persons (PEPs). The SFC will hold extensive authority to monitor licensed virtual asset service providers’ compliance with the new AML/CTF regulations and may enforce penalties if necessary. Hong Kong crypto regulations and the new licensing regime will come into force on June 1, 2023.
Starting from June 1, 2023, companies that lack a license are prohibited from providing any services related to virtual assets and cannot publicly identify themselves as a VA business. Service providers who do not intend to obtain a license must begin to make arrangements to terminate their operations in Hong Kong.
According to the regulation, an individual who engages in crypto services without a valid license may be charged with an offense, leading to a penalty of $5 million fine and up to seven years of imprisonment, provided there are no reasonable justifications for the action.
Further, the regulatory amendments prohibit unlicensed companies from promoting their virtual asset services. Non-compliance with this regulation could result in a six-month imprisonment term and a fine.
The legislation also includes provisions to address fraudulent activities in the crypto space. Any person who utilizes any deceptive method or scheme with the intention to deceive or engages in any fraudulent or deceptive act during a VA transaction may be charged with an offense. Such an offense may lead to a fine of $10 million and a prison sentence of up to ten years.
How to get a cryptocurrency license in Hong Kong
Looking for ways to legalize your cryptocurrency venture in Hong Kong and require assistance with license obtaining?