Taking yet another step away from mainland China and its aggressive posture towards digital currency trading platforms, Hong Kong has announced an expansion of monitoring and overseeing the activities of digital currency exchanges.
Hong Kong has historically supported digital currency exchanges businesses, welcoming exchanges into the provincial sandbox as long as they adhere to laid down rules and regulations. In doing so, the Securities and Futures Commission (SFC) had previously put in place an ‘opt in’ regulatory framework for digital currency trading platforms which allowed platforms that didn't deal in securities to be exempt from these laws.
The SFC has made it no longer possible for trading platforms to operate under the regulatory radar
In efforts to improve protections for digital currency exchanges users, the SFC has recently announced its new plans to regulate all digital currency exchanges regardless of whether they list "security tokens". According to BTC manager, the security watchdog is now looking to adopt the Financial Action Task Force (FATF) recommendations for guidance on how to tighten HK oversight.
The SFC has always been of the opinion that instead of imposing an outright ban on digital currency exchanges like China, Hong Kong authorities should continue working towards creating a regulated environment for digital currency commerce in the city. This led to the introduction of policy requirements like its 2019 demand for all exchanges to have full deposit insurance, and now the SFC’s latest directive. As Chinese law enforcement is continuously investigating principal actors at many major digital currency exchanges and effectively tightening the regulatory noose around smaller exchanges, the two jurisdictions seem increasingly taking divergent approaches to this growing sector.