Hong Kong Regulators Update Guidance for Intermediaries’ Virtual Asset-related Activities
On 20 October 2023, HKMA and SFC issued updated guidance for intermediaries on virtual asset activities, covering distribution, dealing, advisory, and asset management services to enhance regulatory clarity and investor protection.
Hong Kong Regulators Update Guidance for Intermediaries’ Virtual Asset-related Activities
On 20 October 2023, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) jointly issued a circular to update guidance for intermediaries involved in virtual asset (VA) activities. This joint circular aims to clarify regulatory expectations and strengthen investor protection in the rapidly evolving virtual asset market.
Scope of the Updated Guidance
The updated guidance applies to intermediaries that distribute virtual asset products or provide dealing, advisory, and asset management services related to virtual assets. It emphasizes compliance with existing licensing requirements under the Securities and Futures Ordinance (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).
Key Highlights
- Licensing and Regulatory Compliance: Intermediaries must ensure they hold the appropriate licenses for virtual asset activities and comply with all relevant regulatory requirements.
- Risk Management: Enhanced risk management frameworks are required to address the unique risks associated with virtual assets, including market volatility and cybersecurity threats.
- Investor Protection: Intermediaries should provide clear disclosures about the risks of virtual asset investments and ensure suitability assessments are conducted.
- Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF): Strengthened AML/CTF controls are mandated, including customer due diligence and transaction monitoring specific to virtual assets.
Implications for Market Participants
Market participants should review their current virtual asset-related activities and ensure alignment with the updated guidance. This may involve revising internal policies, enhancing staff training, and upgrading technological systems to meet regulatory expectations.
Conclusion
The joint circular from HKMA and SFC reflects Hong Kong’s commitment to fostering a safe and well-regulated virtual asset ecosystem. Intermediaries are encouraged to proactively engage with regulators and adopt best practices to support market integrity and investor confidence.
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