In Hong Kong, the service sector related to the circulation of cryptocurrencies is actively developing. Earlier, the growth of interest in cryptocurrencies was noted mainly in the financial sector. Now this means of payment is used in logistics, healthcare and in a number of other areas.
Hong Kong is a unique region in that it has a fair amount of autonomy in making laws and maintains a reputation as an international financial center operating on the principles of a free market. Therefore, in Hong Kong there is no special legislative framework and regulations that would indicate the status of cryptocurrencies, or businesses with cryptocurrencies, so trademark registration in Hong Kong is great idea.
However, this does not mean that this area remains without state control. A license is required to operate a crypto exchange in Hong Kong.
FATF Requirements for Crypto Exchanges
Blockchain technologies are used all over the world. Operations with virtual assets are based on innovative technologies that make it possible to speed up payments and reduce the cost of transfer. At the same time, the anonymity of transactions on crypto exchanges attracts criminals who can use virtual assets for the illegal trade in drugs and weapons, fraud, tax evasion, and cyber attacks in Hong Kong.
To protect the market from various illegal manifestations, uniform requirements for the operation of a crypto exchange were created. Their activities are regulated by the FATF, an organization that, as of 2019, includes about 40 members (including Russia, China and Hong Kong), as well as more than 10 observer countries.
The FATF Group develops standards to create a unified legal space for the prevention of financial crime and the sponsorship of terrorism, and regularly amends them. Members of the FATF, including Hong Kong, periodically conduct mutual evaluation to ensure that the requirements of the concept are strictly observed, and, if necessary, amend them.
Through the efforts of the FATF, crypto exchanges have received the status of a regulated organization in Hong Kong. According to the recommendations, all crypto exchanges and exchanges have the status of virtual asset service providers (VASPs) and are therefore required to participate in the licensing procedure.
The general requirements for crypto exchanges in Hong Kong include 2 points:
- FATF members must provide each other with information about crypto-exchange clients who make transactions from 1,000 dollars or euros, as well as fight money laundering in Hong Kong.
- Each provider is required to pass the SFC licensing procedure as a cryptocurrency service provider (VASP format) and operate in its jurisdiction (in this case, Hong Kong).
You can learn how to register a legal entity during a pandemic in the material on remote opportunities for starting a business in Hong Kong. Employees of our company are always open for cooperation and professional advice, despite the current restrictions in the work of companies.
How Crypto Exchanges are Regulated in Hong Kong
It is advisable to comply with the FATF requirements in order to avoid being included in various “black lists”, negative investment ratings, and also to increase the status of the Hong Kong crypto exchange in the international arena.
In practice, the first requirement associated with the disclosure of client information causes difficulties. Only major players in the Hong Kong cryptocurrency market can fully follow it, since the implementation of this FATF recommendation is associated with technical difficulties and high material costs in the process. Read more about https://www.fintecharbor.com/crypto-license/.
As for the second paragraph of the FATF requirements on the standardization of the operation of crypto exchanges, it should be considered in more detail, since it is directly related to obtaining a license. Failure to comply will result in fines and/or criminal liability in Hong Kong.
All crypto exchanges that operate in Hong Kong or target Hong Kong investors must obtain licenses from the SFC (Securities and Futures Commission).