Hong Kong to Tighten Laws Regarding Virtual Asset Businesses

Legislators are strengthening regulations on virtual asset service providers (VASPs). VASPs needed to acquire a license from the Securities and Futures Commission (SFC) The SFC will also be able to bound them from disposing of clients' assets in emergencies.

FREMONT, CA: Hong Kong lawmakers are strengthening regulations on virtual asset service providers (VASPs) amid forthcoming updates to its Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill of 2022. The Legislative Council announced that to manage and reduce the risks from virtual assets, it has the choice of either restricting VASPs from operating in Hong Kong or licensing such businesses in order to subject them to some rules.

Under the amended bill, VASPs needed to acquire a license from the Securities and Futures Commission (SFC) to function in the city. The SFC will also be able to bound licensed VASPs from disposing of clients’ assets on the occasion of emergencies such as a default.

This recently occurred to crypto lending firm Celsius, which froze transactions for all its users amid liquidity problems.

The Legislative Council also suggested that businesses delivering or marketing virtual asset services without a license be punishable by a fine of up to HKD 5 million (USD 640,000) and up to seven years in prison. Additionally, businesses that make a fraudulent or deceptive statement when applying for a license will be punishable by a fine of up to USD 130,000 and up to two years in prison. The bill was gazetted in June and no date has been specified to pass the law. Considering Hong Kong’s stature as an international financial centre and the evolution and adoption of virtual assets, the regulatory procedure is considered more in coherence with its economic needs and situation.