The Securities and Futures Commission (SFC) of Hong Kong has recently issued a circular, dated May 31, outlining the transitional arrangements for a fresh licensing system for centralized crypto trading platforms. According to the report, this new licensing regime, which falls under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615) (AMLO), has come into effect today.
Under the newly introduced rule, virtual assets trading platforms (VATPs) offering their services in Hong Kong are now required to obtain a license from the commission. It’s important to note that this circular is applicable solely to platforms that deal with non-security tokens.
The circular emphasizes that VATPs operating in the city before June 1, 2023, are eligible for the transitional arrangements and must apply for a license through the SFC’s application forum WINGS by February 29, 2024. On the other hand, VATPs that did not exist prior to June 1 are not eligible for the transitional arrangements.
As stated by the commission, platforms that choose not to apply for a license will be compelled to halt their operations and cease marketing activities in Hong Kong. It was also announced that existing VATPs can continue to provide virtual asset services in Hong Kong from June 1, 2023, to May 31, 2024, without violating the licensing requirements under the AMLO, thanks to the non-contravention arrangement.
Furthermore, the commission clarifies that there is no transitional arrangement for compliance with the Securities and Futures Ordinance (SFO). VATPs intending to offer trading services in security tokens will be subject to Hong Kong’s securities laws and should only commence their business activities related to security tokens after obtaining the relevant license under the SFO.
While the circular grants a reasonable period for platforms to acquire licenses and continue their operations in Hong Kong, the SFC strongly opposes any delay in submitting applications after February 2024. The commission firmly emphasizes that any applications received after the deadline will be rejected.
The SFC has been actively promoting regulations for virtual asset trading to ensure compliance within the industry. The commission’s proposal for the licensing system was previously introduced and received significant support, although there were some requests for further clarifications.
