VASPs Faces Imminent Ban
Virtual asset service providers (VASPs) are expected to cease operations in the Hong Kong digital finance market if they fail to register with the region’s regulator. Accordingly, the Hong Kong government has scheduled February 29 as the deadline for VASPs operating without proper licenses.
In an official communication, Hong Kong’s Secretary for Financial Services and the Treasury, Christopher Hui, explains that VASPs must apply for licensing by the designated date to maintain their operations. A transitional period has been granted because specific VASPs were operational in Hong Kong before the Securities and Futures Commission’s (SFC) implementation of the licensing framework.
Thus, these service providers can submit their license applications during this transitional period. It is worth noting that firms that do not obtain approval for their applications by February 29 must terminate their activities by May 31.
Hui added that the primary objective of the licensing process for VASPs is to guarantee adherence to regulatory standards and compliance within the financial services industry. As a result, VASPs that plan to continue operations in Hong Kong must submit their license applications without delay to ensure the uninterrupted provision of their services.
SFC’s Enforcement Measures
Per the directives of the regulatory body, service providers that are presently operational must undergo a thorough assessment based on the standards set by the SFC. Hui further said that these crypto firms will receive a “no-deeming notice” from the regulator if they do not satisfy the regulatory requirements.”
As a result, the termination of activities must occur no later than May 31 or within three months from the notice’s issuance date. Hui stated that the SFC is actively preparing to implement enforcement measures in light of the deadline for license application submissions and adherence to specified criteria.
This preemptive strategy entails notifying service providers whose applications are denied notice and distributing the information via multiple publicity channels.
Avoiding Fraud
Furthermore, Hui warned investors about the inherent volatility in virtual assets. He underlined the importance of thoroughly understanding and evaluating associated investments before embarking on such projects.
Hui suggested using only platforms with formal authorization from the SFC to mitigate the risks associated with virtual asset trading and investments. However, the financial services secretary raised concerns about the possibility of unlicensed operators and service providers engaging in illicit operations.
The official revealed that the regulator is considering expanding restrictions to include over-the-counter (OTC) trading platforms in Hong Kong. Thus, it can tighten regulatory oversight. Citing specific cases of fraudulent activity involving trading platforms last year, Hui announced the impending start of a consultation process on a regulatory framework in the region.