Policy to regulate OTC
Christopher Hui, director-general of Hong Kong’s Financial Services and Treasury Board (FSTB), argued on the 2nd that over-the-counter trading (OTC) of crypto assets (virtual currencies) needs to be regulated. He said that soon he plans to start consultations on the regulatory framework.
In his official blog entitled “A New Stage in Crypto Asset Regulation,” Hui said that OTC platforms, which operate in store and online formats and are “easily accessible to ordinary consumers,” are involved in crypto fraud cases. He pointed out.
In fact, OTC venues played a role in multiple fraud cases involving several unlicensed cryptocurrency trading platforms that occurred last year, misleading investors into directing their funds to these unlicensed platforms.
In 2023, a series of fraud cases related to virtual currency occurred in Hong Kong.
In September, a large-scale fraud involving the unregistered exchange JPEX was discovered. 2,360 cases of damage were confirmed, and the total damage amounted to approximately 28.3 billion yen. In November, Hong Kong police launched an investigation into the cryptocurrency exchange Hounax after more than 130 people alleged they were defrauded of nearly 2.3 billion yen (HK$120 million).
Also, in October, a phishing scam pretending to be Binance occurred. Eleven people suffered losses of approximately 66.5 million yen or more.
In Hong Kong, the regulatory environment for virtual currency exchanges has been improved, and new regulations including a licensing system began to be implemented in June last year. On the other hand, no regulatory framework has been established for OTC.
connection: Hong Kong will implement new rules for virtual currency exchanges from June, stipulating stocks that can be listed, etc.
In October last year, Hui mentioned the JPEX fraud incident and emphasized the importance of investing through regulated platforms. He had said he would consider a regulatory framework for OTC exchanges.
The FSTB is currently soliciting comments from the public and industry regarding its OTC regulations.
The deadline for the transition period approaches
In Hong Kong, businesses that operated virtual currency exchanges even before the virtual currency licensing system came into effect have been allowed to transition to the new system. Existing exchanges must apply for a license by the end of this month if they wish to continue operating.
Exchanges that do not submit applications by February 29th or are determined by the Securities and Futures Commission (SFC) to not meet licensing requirements will be required to complete their suspension of operations by May 31st. .
Hui said unlicensed platforms may not comply with regulatory requirements and are also more likely to engage in fraud.
Regarding virtual currency investment, he stated, “I would like to reiterate to investors that many virtual currencies have no intrinsic value and are subject to rapid price fluctuations.” It urges caution to carefully consider investment risks in advance.
FSTB is working with the Hong Kong Monetary Authority (HKMA) to develop regulations regarding stablecoins.
The new regulation proposes to require issuers of fiat-pegged stablecoins (FRS) to obtain a license issued by the HKMA. At the same time, a sandbox system will be introduced to provide regulatory compliance guidelines for businesses planning to issue FRS in Hong Kong.
Since the public comment period on stablecoin regulations will end at the end of this month, Hui called on interested parties to submit their opinions.
What is a stablecoin?
Refers to a virtual currency whose price is always stable. Stablecoins are a type of crypto asset that, unlike volatile assets such as BTC, ETH, and XRP, are backed by currencies such as the US dollar and aim to maintain their value. In addition to stable coins backed by the US dollar (USDT/USDC), there are also stable coins that use algorithms. /p>
▶️Virtual currency glossary
connection: Hong Kong stablecoin issuance guidelines to be released next year