SFC Consults on Proposed Regulatory Requirements for VA Trading Platform Operators | 31 March 2023

The Securities and Futures Commission of Hong Kong has recently released a consultation paper on proposed regulatory requirements for virtual asset trading platform operators. In light of the rapid growth of virtual assets, it has become increasingly crucial to ensure that these platforms operate fairly, transparently, and securely, with the interests of investors being protected. The proposed regulatory framework, which would require virtual asset trading platforms to be licensed by the SFC, aims to address this need by imposing a range of requirements on these platforms.

One of the key requirements proposed in the paper is the implementation of measures to prevent market manipulation, which is a significant risk associated with virtual asset trading. Additionally, the proposed framework would require virtual asset trading platforms to ensure the safe custody of assets, as well as to disclose key information to investors. This would enable investors to make informed decisions and better manage their risks.

In addition to these requirements, the consultation paper also sets out a range of requirements for the management of risks associated with virtual assets, including cybersecurity and operational risks. This is particularly important given the increasing frequency and sophistication of cyber attacks in today's digital landscape.

Overall, the consultation paper proposes a robust regulatory framework that seeks to address the unique risks and challenges posed by virtual asset trading. It is open for public comment until 31 May 2023, providing interested parties with ample opportunity to provide feedback and shape the future of virtual asset trading in Hong Kong.

#sfc #hongkonglaw #virtualassettradingplatform

Timecodes:
00:00 Julia Charlton's welcome speech
00:14 Background to Hong Kong’s New Licensing Regime for VASPs
05:33 Who will require a licence for providing VA service?
06:51 VASP Licensing Requirement under the AMLO
08:17 What is the definition of “Virtual Assets”?
10:03 The VATP Guidelines
10:58 Fit and Proper Test
12:04 General Principles Outlined in the VATP Guidelines
13:42 Whether Retail Investors should be allowed access to Licensed VA Trading Platforms
16:57 Onboarding requirements
19:24 Suitability Obligation
21:59 Solicitation or recommendation of VAs
23:13 Solicitation or recommendation of complex products
25:10 Requirements Concerning Governance of Licensed VA Trading Platform Operators
27:29 General token admission criteria
30:00 Specific token admission criteria – the relevant virtual assets must be an “eligible large-cap virtual assets”
32:47 Other Hong Kong token due diligence requirements
34:34 Disclosure Obligations (I)
36:02 Disclosure Obligations (II)
38:35 Disclosure Obligations (III)
40:04 SFC’s proposed requirements for insurance or compensation arrangements
42:50 Trading in virtual asset derivatives
43:33 Adaptations to existing requirements to be incorporated into the VATP Guidelines (I)
46:34 Adaptations to existing requirements to be incorporated into the VATP Guidelines (II)
47:20 Adaptations to existing requirements to be incorporated into the VATP Guidelines (III)
48:28 Guideline on Anti-Money Laundering and Counter-Financing of Terrorism
50:09 Virtual asset transfers
51:56 Requirements for the identification of suspicious transactions and sanctions screening in relation to virtual asset transfers
54:55 SFC Regulatory Powers
57:57 Transitional Arrangements for existing platform operators
1:00:16 Transitional Arrangements
1:01:41 Pre-existing VA trading platforms which intend to apply for a licence
1:03:03 Pre-existing VA trading platforms which do not intend to apply for a licence /
VA trading platforms already existing in Hong Kong
1:03:49 SFC Publication of Trading Platform Lists
1:05:50 Dual Licensing
1:07:21 External assessment report
1:09:57 Selection and appointment of external assessors

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Julia Charlton
https://www.charltonslaw.com/the-firm/people-culture/team-profile/julia-charlton/

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