The Securities and Exchange Commission (SFC) of Hong Kong reminds the public that the non-infringement period for virtual asset trading platforms (VATPs) operating in Hong Kong under the Anti-Money Laundering and Anti-Money Laundering Ordinance terrorism (Chapter 615) (AMLO) ) will expire on June 1, 2024.
All VATPs operating in Hong Kong must either be licensed by the SFC or be “deemed to be licensed” VATP applicants under the AMLO. It is a criminal offense to operate VATP in Hong Kong in breach of the AMLO and the SFC will take all appropriate action for any breaches of the law.
Investors are required to trade virtual assets only on SFC-licensed VATPs. They should check the “List of Licensed Virtual Asset Trading Platforms” at the SFC website to ascertain whether the VATP they are dealing with is officially licensed by the SFC.
In addition, investors are reminded that VATP applicants deemed to be licensed are NOT officially licensed by the SFC. These applicants have been operating in Hong Kong prior to the new VATP licensing regime under the AMLO. While they are committed to improving their policies, procedures, systems and controls to comply with the SFC’s regulatory requirements, they must demonstrate the actual implementation and effectiveness of these measures to the SFC’s satisfaction.
VATP applicants deemed to be licensed (and their ultimate holders) must fully comply with all SFC regulatory requirements and licensing conditions. The SFC does not expect such applicants to actively promote their services or on-board new retail customers before they have demonstrated the actual implementation and effectiveness of their policies, procedures, systems and controls to the satisfaction of the SFC and obtained formal authorisation.
The SFC also reminds all VATPs and their ultimate owners to comply with all applicable laws and regulations, including but not limited to preventing mainland Chinese residents from accessing any of the virtual services associated with their assets , and to take all the necessary measures for the supply of VATP. control entities and related parties to do the same.
The acceptance agreement serves to strike a balance between protecting investors and facilitating market development. As such, it is only a temporary arrangement whereby any failure to comply with key regulatory requirements to protect investors will result in the SFC expeditiously refusing the license application of a deemed licensed applicant.
Over the coming months, as VATP applicants who are deemed to be licensed continue their applications, the SFC will carry out on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on safeguarding client assets and knowledge -your customer processes.
Under the AMLO, any person carrying on a virtual asset service business (ie, operating a virtual asset exchange) in Hong Kong, or claiming to be carrying on such a business, is required to apply for a license from the SFC.
VAT entities that carried on business in Hong Kong providing a virtual asset service before 1 June 2023 (ex VATP) may continue to provide such services in Hong Kong from 1 June 2024 without breaching the licensing requirements, provided that the VAT in question are considered license applicants under the AMLO. To be eligible for such an account arrangement, a pre-existing VATP must meet certain conditions and confirm that it can fully comply with the SFC’s regulatory requirements.