An overview of the cryptocurrency regulations in Hong Kong
is commitment to innovation and consumer protection in the evolving digital finance space.
For example, virtual asset trading platforms must acquire licenses to operate in Hong Kong. With measures like Anti-Money Laundering requirements, the question “Is crypto regulated in Hong Kong?” has a clear answer — yes, through a balanced framework allowing the regulated use of cryptocurrencies while managing risks.
Is crypto regulated in Hong Kong?
In Hong Kong, cryptocurrencies have a clear legal status. Laws regulate them to balance innovation and consumer protection. However, cryptocurrencies are not considered legal tender in Hong Kong; rather, they are treated as virtual assets (VAs).
There are two types of VAs. One is security tokens, also called “tokenized securities”; the other is non-security tokens, or “virtual commodities.” Security tokens have rules under the Securities and Futures Ordinance (SFO). Most cryptocurrencies, like Bitcoin
BTC
$67,218
, are not security tokens under the SFO.The Securities and Futures Commission (SFC) regulates cryptocurrencies in Hong Kong. Since June 2023, crypto trading platforms need an SFC license to operate in Hong Kong. This makes them follow strict rules on asset storage, Know Your Customer (KYC) measures, Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT).
Rules on crypto asset trading in Hong Kong
Hong Kong’s regulatory framework for cryptocurrency trading aims to create a secure and well-regulated environment for digital asset transactions. However, there are no specific laws in Hong Kong that regulate the promotion of crypto assets.
Licensing for service providers
Since June 2023, virtual asset service providers (VASPs) must be licensed in Hong Kong. On June 1, 2023, Hong Kong implemented a new licensing regime for virtual asset trading platforms (VATPs), overseen by the SFC. This regime includes comprehensive guidelines, FAQs and handbooks for VATP operators.
In Hong Kong, VASPs are primarily allowed to serve professional investors and can offer security tokens, while VATPs can serve retail consumers but only with non-security tokens. VASPs are more focused on assets considered securities, requiring professional expertise. VATPs, now open to retail investors, are expected to adhere to strict guidelines for investor protection and information accuracy.
Advertisement
BlockShow by Cointelegraph is back with a crypto festival in Hong Kong, May 8-9 - Secure Your Spot!
Ad
The dual licensing regime under which VASPs and VATPs operate combines and simplifies the previous regulatory measures, aligning them with international standards for combating money laundering and terrorist financing. This framework enhances the overall integrity and stability of the virtual asset market in Hong Kong.
Rules for stablecoins in Hong Kong
The Hong Kong Monetary Authority (HKMA) is Hong Kong’s central banking institution. The HKMA serves as the de facto central bank of Hong Kong, responsible for maintaining monetary and banking stability. To get an HKMA license, stablecoins must have reserves at least equal to the par value. The reserves must be kept separate and safe.
Stablecoin companies will also need to provide reports on a regular basis about the reserves and other related information. However, algorithmic stablecoins are not eligible for this license. The HKMA proposed licensing stablecoins pegged to fiat money only.
Rules for asset transfers in Hong Kong
Under Hong Kong’s Travel Rule, all virtual asset transactions require specific customer information shared with SFC, regardless of the amount.
For transactions over 8,000 Hong Kong dollars ($1,000), detailed data like the originator’s and beneficiary’s names, account numbers, addresses and identification details are needed. For transactions below 8,000 HKD, simpler information such as the names and account numbers of the originators and beneficiaries is sufficient. This rule includes transfers to and from self-hosted wallets, requiring similar details about the originator and beneficiary.
VASPs must also evaluate the risks associated with these transfers and take the necessary precautions. Exchanges warned that if a user’s details don’t match when depositing or withdrawing money, the transaction will be canceled. And the user will still have to pay fees for the canceled transaction.
Is crypto considered a security in Hong Kong?
In Hong Kong, whether a cryptocurrency is classified as a security is contingent upon its inherent features. Some VAs give equity, ownership, debt, liability, dividends, interest or similar rights. These are security tokens under the SFO.
Most common cryptocurrencies like Bitcoin and Ether
ETH$3,872
are typically not securities. They are treated as non-security tokens or virtual commodities.How to buy cryptocurrency in Hong Kong
Hong Kong has become a major regional site for adopting cryptocurrencies. Many options exist for investors to buy crypto assets like Bitcoin and Ether. This section explores accessible ways to purchase crypto in Hong Kong.
How to buy cryptocurrency on a crypto exchange in Hong Kong
Exchanges such as Binance, Huobi or Coinmama simplify buying crypto in Hong Kong. The process typically involves:
- Creating an account
- Completing KYC verification
- Depositing money through a chosen method
- Purchasing cryptocurrencies.
These platforms comply with KYC Hong Kong regulations on cryptocurrencies.
How to buy crypto on a P2P platform in Hong Kong
P2P trading in Hong Kong connects buyers and sellers directly. Creating an account on a P2P platform, completing KYC verification, browsing seller advertisements and starting a transaction based on pre-arranged conditions are necessary when purchasing cryptocurrency on a P2P platform in Hong Kong.
While less user-friendly than exchanges, P2P provides a personalized trading experience. Also, caution is essential to avoid scams on P2P platforms.
How to buy crypto using ATMs in Hong Kong
Finding an ATM that allows the purchase of crypto in Hong Kong is the first step in the process. Depending on the ATM’s protocol, the person might also need to go through an identification verification process. Then, they must choose their preferred cryptocurrency and make the corresponding deposit in Hong Kong dollars.
After that, the machine gives directions on how to add the freshly obtained digital currency to the user’s wallet. The user should confirm that the cryptocurrency is compatible with their wallet and be aware of the transaction fees and exchange rates that the ATM charges.
More than 150 Bitcoin ATMs from CoinUnited, HK Bitcoin ATM and a few other providers are located across Hong Kong. They allow quick, user-friendly crypto purchases with cash. Often, no pre-registration is necessary. However, fees may be higher than on exchanges.
Do Hong Kong banks accept cryptocurrency?
Major banks in Hong Kong, including HSBC, Standard Chartered and Bank of China (Hong Kong), have been encouraged by the HKMA to support the cryptocurrency sector by offering financial services to their clientele. This action is in line with the government’s initiatives to support the growth of Hong Kong’s cryptocurrency industry.
However, it is important to note that banks don’t directly enable crypto purchases. But they allow transfers of cash into trading accounts. Linking bank and exchange accounts is popular for depositing fiat currency to buy cryptocurrencies.
The future of cryptocurrency in Hong Kong
Hong Kong is poised to significantly advance its cryptocurrency sector by 2024. Key developments include the introduction of the region’s first crypto exchange-traded funds (ETFs) and the establishment of a regulatory framework for stablecoins.
The HKMA and SFC are actively working on regulating stablecoins, particularly those linked to fiat currencies. Additionally, the Hong Kong government is fostering a supportive environment for cryptocurrency businesses, aiming to position the city as a major hub for digital finance. These efforts signify Hong Kong’s commitment to integrating cryptocurrency into its mainstream financial system.
