Overview
The Hong Kong Financial Services and Treasury Bureau (FSTB) has launched a public consultation on proposed legislation to regulate over-the-counter (OTC) trading of virtual assets. This initiative aligns with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) licensing framework for virtual asset service providers.
📅 Consultation Period: February 8, 2024 – April 12, 2024
📄 Consultation Paper
Key Proposals
1. Licensing Requirements
- Scope: Covers all OTC virtual asset trading services, including physical stores and digital platforms (e.g., ATMs).
- Exclusions: Peer-to-peer transactions not conducted as commercial activities.
- Eligibility: Companies registered in Hong Kong with a permanent business address.
2. Permitted Activities
- ✅ Spot trading of virtual assets for fiat currencies (e.g., BTC/USDT).
- ❌ Conversion between virtual assets (requiring a separate exchange license).
- ❌ Advisory services, derivatives, or financial products.
3. Virtual Asset Eligibility
- Retail Investors: Only assets tradable on licensed Hong Kong exchanges.
- Stablecoins: Issued by HKMA-licensed entities (algorithmic stablecoins excluded).
4. Compliance Obligations
- Adhere to AMLO requirements.
- Appoint compliance and AML officers.
- Maintain robust governance and risk management frameworks.
- Record-keeping for transactions and fund flows.
5. Penalties
| Offense | Penalty |
|---|---|
| Unlicensed OTC trading | HKD 1M fine + 2 years imprisonment |
| False advertising | Level 5 fine + 6 months imprisonment |
| Fraudulent transactions | HKD 10M fine + 10 years imprisonment |
Transition Options
- Option 1: No "deemed licensed" status – Businesses must apply within 3 months or wind down.
- Option 2: "Deemed licensed" status – Allows continued operation pending final license approval.
FAQs
Q1: Who needs a license?
A: Any entity providing OTC virtual asset trading services in Hong Kong, including foreign-registered companies with a local presence.
Q2: Can stablecoins be traded?
A: Only HKMA-licensed stablecoins; algorithmic or commodity-backed stablecoins are prohibited.
Q3: How long is the transition period?
A: Six months from the legislation’s effective date.
👉 Explore Hong Kong’s Virtual Asset Regulations
👉 Learn About AML Compliance for Crypto Businesses
Next Steps
Submit feedback via [email protected] by April 12, 2024.
📍 Address: Financial Services Branch, 24/F, Central Government Offices, Tamar, Hong Kong.