Hong Kong To Prepare New Legislation Targeting Crypto Exchange Service Providers
The recent FTX fiasco not only shattered the spirit of crypto traders and triggered probes into various crypto companies but also pushed global law authorities to tighten regulations and set an eye on crypto exchange service providers.
Similarly, following the footsteps of other jurisdictions, lawmakers in Hong Kong have proposed amendments to its terror financing and anti-money laundering (AML) framework, which seeks crypto exchanges to operate under a licensing regime. Specifically, the latest bill requires the same rules on crypto exchange service providers as implied on traditional financing organizations.
Terra collapse in May and FTX saga disrupting the crypto market the same year have led law authorities to face criticism from the public as they failed to protect retail investors. As a result, it raised the demand to bring crypto services companies under strict legislation and make them follow strict AML and apply investor protection measures that mitigate risks involved in centralized exchanges.
After the new bill is enacted, crypto companies willing to run their businesses in Hong Kong must go through user protection laws and AML guidelines. This move by Hong Kong authorities comes on the heels of the FTX collapse and paves the way for officials to remove the risks in centralized exchanges easily.
Hong Kong Monetary Authority Interested In CBDC
Pointing to the latest amendments to the financing rules of Hong Kong, the Monetary authority of the state has voiced support for blockchain technology in an international conference attended by governors of the world’s central banks a month ago. Bank of Internationational Settlements (BIS) and Bank of Thailand (BOT) hosted this event, and financial experts expressed their opinions on how central banks should interact with evolving financial technology.
When the Bank of Korea expressed fears in the wake of recent crypto contagions, Eddie Yue, chief executive of the Hong Kong Monetary Authority, shed light on the benefits of digital technology and central bank digital currency (CBDC). Yue admitted that using stablecoins in payment systems allows cost-effective transactions but involves risks as a new technology.
Other banks who joined the table to discuss the digitalized monetary system include Changyong Rhee, governor of the Bank of Korea, and Adrian Orr, governor of the Reserve Bank of New Zealand.
The chief executive of the Hong Kong Monetary Authority further urged that blockchain is a nascent technology and overseeing its on-chain activity is complex and complicated. Hence the regulatory authorities should counter the off-chain activities to mitigate possible risks. He added:
We can start with regulating off-chain activities like regulating virtual asset exchanges. Hong Kong will soon introduce not just AML (anti-money laundering) aspect but also investor protection.
Changyong Rhee, representing the Bank of Korea, pointed toward recent contagions on the other side and said;
“I was more positive before, but after seeing the Luna, Terra, and now the FTX issues. I don’t know [if] we will see the real benefit of this new technology, at least for monetary policy.”
Featured image from Pixabay and chart from TradingView.com
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