- Hong Kong creates strict regulations for crypto firms.
- The deadline for feedback on the regulations has closed.
- Hong Kong’s standards may be high but for a good cause.
An advisory group member to the securities regulator of Hong Kong, Lucy Gazmararian, has said the crypto rules created by the city might serve as a short-term stumbling block to crypto startups.
Hong Kong’s Virtual Asset Service Providers set high standards, with the Securities and futures commission wanting the crypto industry to be on the same level of compliance standards as traditional financing firms.
During a conversation with Cointelegraph, Lucy Gazmararian, the crypto venture firm Token Bay Capital founder and an SFC fintech advisory group member, explained Hong Kong’s regulatory approach. At the same time, setting a high standard was also in place for a good reason.
The standards were made very high because the Securities and futures commission approach was made to ask VASPs to apply to the same standards that exist in financial institutions like giant banks, and substantial asset managers are made to comply.
Late last month, the Securities and Futures Commission published a paper that considered whether licensed VASPs could serve retail investors and what standards of investor protection measures they must impose. There were conversations on Anti-Money Laundering and Know Your Customer policies.
The advisor also added that the high standards could inadvertently pose a challenge for the crypto industry for a short period, with crypto businesses often in their startup phases having funding but no vast amounts that can back up their startups, the funding coming in hundreds and not millions.
The regulations and their framework will incur a significant amount of money if it is to be complied with. It points out the need for local VASPs to have insurance, an independent assessment report, and a crypto store in cold storage.
Lucy Gazmararian added that a solid framework would help build more financial firms willing to help promising startups get off the bottom by funding them. Companies who refuse to get the lice would uphold the most stringent standards. So while the standards set by Hong Kong are undeniably high, it is for a good cause.
The Securities and Futures Commission also encouraged individuals, crypto firms, and corporations to review the 361-page consultation paper the regulators made and provide feedback.
The goal of the securities regulator is for these entities to share their views on it and point out things that may have needed to be noticed while the document was created. The deadline for submission of feedback was March 31st.
Conclusion
Hong Kong embarked on a journey to become one of the most crypto-friendly cities, and they have yet to back down, instead creating regulations and newer frameworks to ensure the crypto space in the city is healthy.
