New licensing regime for foreign crypto exchange platforms

The new regime will guard against money laundering and terrorist financing.

Ethereum, Bitcoin and Dogecoin have increasingly been making the headlines as more and more investors wade into cryptocurrencies; but whilst interest continues to grow, much is still unknown about these virtual assets.

Hong Kong’s Financial Action Task Force (FATF) defines virtual assets as “a digital representation of value that can be digitally traded or transferred” that can be used for payment or investments. It has time and again flagged that virtual assets that can be exchanged for money pose risks of money laundering and terrorist financing.

In line with this, the Hong Kong government has moved to set a licensing requirement for virtual asset services providers (VASPs), including companies incorporated outside of Hong Kong.

The Financial Services and the Treasury Bureau (FTSB) of Hong Kong recently announced the conclusion of its public consultation on proposals to improve the city’s regulations against money laundering and terrorist financing.

The Government sees both risks and opportunities from this new trend

Secretary for Financial Services and the Treasury Christopher Hui said the government had just concluded consultation on the regulatory system for the emerging investment trend, using cryptocurrencies.

“Based on the feedback received, a change is introduced to allow foreign incorporated companies to also obtain a license as a virtual asset services provider in Hong Kong,” Hui said during the FinTech Forum at the StartmeupHK Festival.

In the initial version of the proposal, only locally incorporated companies were allowed to apply for a VASP license. The FSTB, however, agreed to change the provision at the recommendation of more than a dozen of the respondents.

The regime sought to impose requirements that will protect investors, prohibit market manipulation, and protect the city against money laundering and terrorist financing.

“The Government sees both risks and opportunities from this new trend, and we are of the view that a proper regulatory system could facilitate development and at the same time protect investors and adhere to international regulatory standards,” he said.

Following the public consultation, the government started drafting the amendment bill, which it plans to transmit to the Legislative Council within the 21/22 legislative year.

THE CHARTIST: HONG KONG’S ULTRA-RICH POPULATION FALLS BY 5.4%

Crazy rich Hong Kongers may be getting fewer, but the city maintains its status as amongst the top 10 territories with the wealthiest populations. Hong Kong’s population of “very high net worth” (VHNW) individuals dropped 5.4% to a total of 60,425 individuals, with a total wealth of $667b in 2020

Despite this, the city held its position as the 8th biggest population of VHNW residents, according to Wealth X’s 2021 report.

“In Hong Kong, China’s imposition of a new national-security law led to widespread social unrest and diminished the territory’s attractiveness as an international business hub,” Wealth X advised.

Hong Kong also ranked 8th in 2019 with 63,530, reflecting a 10.5% year-on-year increase; and a total wealth of $663b.

The city was considered this year’s underperformer against its Asian neighbours, particularly, China, Japan, South Korea and Taiwan.

Asia placed second ahead of Europe as its overall VHNW population increased 5.2% to 761,070, raising its collective net worth to $7.6t. This represents around 29% of the global VHNW wealth.

Top 10 VHNW cities

Source: WealthX