March 16th, 2023

Hong Kong Emerges As An Attractive Hub For The Virtual Asset Industry Amidst Regulatory Scrutiny

The virtual asset industry is facing increasing scrutiny and regulatory clampdowns worldwide, leading to the emergence of new hubs for the industry. Hong Kong is one such hub that has proposed rules allowing retail investors to trade certain “large-cap tokens” on licensed exchanges, contrasting with mainland China’s ban on crypto-related transactions. Although the Securities and Futures Commission of Hong Kong has not specified which tokens would be allowed, industry insiders believe Bitcoin and Ether are likely to be among them.

China’s crackdown on crypto trading aimed to protect individual investors from speculative activity. However, the crypto industry’s increasing bankruptcies and layoffs may justify their actions. Despite this, the industry continues to attract investment and talent, making it hard to imagine Beijing sitting idly by while the rest of the world develops new building blocks that could potentially spark a new wave of innovation as big as the current internet itself.

As a result, many of China’s web3 startups have set up new bases in more crypto-friendly locations such as Singapore and Dubai. However, with Hong Kong’s more relaxed regulatory environment for cryptocurrencies, some Chinese-founded web3 companies in exile may consider returning home. Hong Kong’s proposal stipulates that all centralized virtual currency exchanges operating in the city or marketing services to the territory’s investors must obtain licenses from the securities and futures authority.

The proposed requirements cover key areas such as safe custody of assets, know-your-client, conflicts of interest, cybersecurity, accounting and auditing, risk management, anti-money laundering/counter-financing of terrorism, and prevention of market misconduct. Centralized crypto exchanges must ban Hong Kong IP addresses until they obtain the relevant permits to operate in the city. The regulatory requirements are open for consultation until March 31, and the new licensing regime will take effect on June 1. This move by Hong Kong is strategic, as it can attract crypto companies and investments to the city. Implementing clear regulatory frameworks would help the industry gain mainstream adoption and bring in more institutional investors.

AML Crypto Regulations In Hong Kong

The Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (AML/CTF Amendment Bill 2022) on December 7, 2022. This bill introduced a licensing regime for virtual asset service providers (VASPs) and imposed anti-money laundering (AML), counter-terrorism financing (CTF), and investor protection obligations upon these actors.

VASPs that are licensed in Hong Kong are subject to a number of AML, CTF, and investor protection obligations. These include:

Customer Due Diligence (CDD): VASPs must conduct CDD on their customers, which includes identifying and verifying the identity of the customer, the beneficial owner, and any other person who exercises control over the customer. VASPs must also assess and understand the nature and purpose of the business relationship with the customer.
Ongoing Monitoring: VASPs must monitor their customers’ transactions on an ongoing basis to ensure that they are consistent with their knowledge of the customer, the customer’s business, and the risks associated with the customer.
Record-Keeping: VASPs must maintain adequate records of their customers, their transactions, and their risk assessments. These records must be kept for a period of at least five years.
Reporting: VASPs are required to report suspicious transactions to the Joint Financial Intelligence Unit (JFIU) of Hong Kong. Suspicious transactions include those that are inconsistent with the customer’s profile, those that have no apparent economic or lawful purpose, or those that involve the proceeds of crime.
Investor Protection: VASPs must also put in place measures to protect their customers’ assets. This includes measures such as segregation of customer assets from the VASP’s own assets and insurance against losses.
Penalties for Non-Compliance: VASPs that fail to comply with the new regulations are subject to a range of penalties, including fines, suspension or revocation of their license, and criminal liability. Individuals who are found guilty of money laundering or terrorist financing may face imprisonment of up to 14 years and fines of up to HKD 5 million.

The new regulations also provide for the imposition of sanctions by the United Nations Security Council or by Hong Kong in respect of breaches of international sanctions.

Licensing And Registration Requirements For VASPs In Hong Kong

Anyone who engages in a virtual asset exchange business in Hong Kong must apply for a license with the SFC. The AML/CTF Amendment Bill 2022 also introduced regulations for VASPs to comply with the Crypto Travel Rule.

The HKMA will only grant licenses to VASPs that meet certain criteria, including:

The company must be incorporated in Hong Kong.
The company must have a permanent place of business in Hong Kong.
The company must have adequate financial resources.
The company must have appropriate AML/CTF systems and controls in place.
The company must have a compliance officer responsible for ensuring the company’s compliance with the new regulations.

VASPs that fail to obtain a license will be prohibited from providing virtual asset services in Hong Kong.

Complying With The Crypto Travel Rule In Hong Kong

The Crypto Travel Rule will be effective in Hong Kong as of June 1, 2023. The new regulatory regime will provide industries with a grace period to prepare for compliance until that date. In Hong Kong, Travel Rule requirements apply regardless of the transaction amount.

The scope of data to be exchanged varies depending on the threshold of the transaction. For virtual assets that amount to HKD 8,000 or more, the following information needs to be shared: name, account number, and address of the originator, as well as the beneficiary’s name and account number. For virtual assets that amount to less than HKD 8,000, only the name and account number of the originator and beneficiary are required.

There are no differences in customer personally identifiable information (PII) requirements for cross-border transfers and transfers within Hong Kong. However, for wire transfers, the information recorded must include the number of the originator’s account or a unique reference number assigned to the wire transfer by the financial institution.

Non-custodial or self-hosted wallet transactions do not have any specific requirements in Hong Kong. The AML/CTF Amendment Bill 2022 defines virtual asset transfers subject to Crypto Travel Rule requirements as transactions for transferring virtual assets carried out by an institution on behalf of an originator, with a view to making the virtual assets available to the originator or another person at an institution, which may be the ordering institution or another institution.

To sum up, Hong Kong’s plan to permit retail investors to trade large-cap tokens on licensed exchanges is a significant advancement for the worldwide crypto industry. While China’s crackdown on crypto trading was meant to safeguard individual investors from speculative behavior, Hong Kong’s proposed regulatory framework is more lenient and has the potential to lure more crypto companies and investments to the city. The establishment of clear regulatory frameworks would aid in the industry’s adoption by the general public and attract more institutional investors. I hope to witness a harmonious balance between the two approaches.

Source: https://www.benzinga.com/23/03/31340390/hong-kong-emerges-as-an-attractive-hub-for-the-virtual-asset-industry-amidst-regulatory-scrutiny

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com

j j j

November 5th, 2022

Positive Crypto Signs from U.K. and Hong Kong: Who is the New Crypto Hub?

U.K. has a new pro-crypto PM and a new name for stablecoins

At the point of the news on the vote to recognize Crypto as regulated financial instruments, Bitcoin just spiked to $21,170. This aligns with the new crypto developments in the U.K. market. As part of the Financial Services and Markets Bill, the U.K. House of Commons, the lower house of Parliament, agreed on Tuesday to regulate cryptocurrency assets as financial instruments. The House of Lords, the upper house, will vote on the bill before it becomes law. This occurs as Rishi Sunak, who on Monday was appointed as the nation’s next prime minister, has a history of endorsing cryptocurrencies.

The local cryptocurrency sector, which recently celebrated Rishi Sunak’s election as the nation’s new prime minister, will likely applaud moves to grant legal legitimacy to digital assets. When Sunak served as the Boris Johnson administration’s finance minister, he presented the markets bill, which indirectly led to the stablecoin regulations.

The bill expands upon current stablecoin regulating provisions and uses the term “Digital Settlement Assets” (DSA) in place of “crypto assets,” moving away from the use of the phrase “crypto assets.” Stablecoins with a focus on payments that are cryptocurrencies tethered to the value of other assets like the U.S. dollar or gold were already covered by elements in the draft bill that would have extended existing restrictions to them.

According to Griffith, the financial services and city minister, the crypto provision “clarifies that crypto assets could be brought within the scope of the existing provisions” of the Financial Services and Markets Act 2000 relating to regulated financial activities. The crypto provision depends on the definition of “crypto asset” inserted by a new clause 14. The regulations might control cryptocurrency advertising and ban businesses that aren’t allowed to operate nationwide.

“The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities,” Griffith said. He added: “The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities,”

The Crypto and Digital Assets All Party Parliamentary Group (APPG) provides a forum for parliamentarians, regulators and the U.K government to discuss challenges and opportunities relating to the crypto sector. This group, chaired by Scottish National Party member of Parliament (MP) Lisa Cameron, has issued a written statement to the media seeking regulatory clarity and business certainty. “U.K. crypto and digital asset firms desperately need clarity over the U.K.’s approach to crypto policy and for the government to deliver on its vision for the U.K. crypto sector,” Cameron said in the statement.

The legalization of cryptocurrencies and digital assets as financial instruments is still pending. Important requirements that must be met for the Bill include: Before the Bill receives final royal sanction from the next king, King Charles III, the House of Lords will need to accept or change it.

The U.K. government can assure financial stability and strong regulatory standards by recognizing the promise of this technology and regulating it at this time, allowing these new technologies to be employed in the future reliably and safely.

Hong Kong wants to be positioned as crypto hub, while Singapore pivots

A few years back, Hong Kong was on the right track to becoming a crypto hub. Then Hong Kong’s regulator, the Securities Futures Commission (SFC) knocked on doors. Exchanges were questioned about listing tokens that seemed like securities and also issued warnings about high leverages.

Fast forward to 2022, October 31, the Hong Kong government is exploring legalizing retail crypto trades. Financial Secretary Paul Chan announced in a keynote speech at the Hong Kong Fintech Week conference that authorities would begin a consultation process on providing retail investors with “a suitable degree of access” to virtual assets. “We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” he added.

In contrast, Singapore is significantly restricting access to cryptocurrencies for individual investors after last year’s market collapse brought down several digital asset companies with ties to the Southeast Asian country and caused much greater losses throughout the industry. If you remember, many of the huger crypto companies moved from Singapore to Dubai, and now the same thing is happening again. Hong Kong appears to be the next hotspot for digital-asset enterprises, entrepreneurs, and investment.

Even the head of the central bank, Ravi Menon, admitted in a Bloomberg Television interview that some crypto enterprises with a retail concentration would leave the city-state, stating plainly, “We wish them good luck.”

Cryptocurrencies “play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” the Monetary Authority of Singapore (MAS) stated in a media statement. Singapore’s stand is very firm and has made it clear that they are not banning cryptocurrencies and is working towards reducing risks.

Positive signs

I see all these are positive signs. Singapore is planning ahead. Hong Kong is leaving some room going forward. U.K.’s plan is ambitious. Hong Kong seems like walking on a different path than China which has banned cryptocurrencies completely. People on the ground are now speculating that Hong Kong could be the outflow channel for the Chinese to start trading cryptocurrencies again.

The recognition of cryptocurrencies under proper regulations would go very far. I am optimistic about the outcomes. #anndylian

Source: https://www.benzinga.com/22/11/29572049/positive-crypto-signs-from-u-k-and-hong-kong-who-is-the-new-crypto-hub

Anndy Lian

www.anndy.com

j j j

March 16th, 2022

This Is How South Korea’s Incoming President Aims to Turn the Country Into Crypto Hub

Yoon Suk-yeol – South Korea’s new president – promised he will allow initial coin offerings (ICOs) and impose friendly crypto taxation rules.

South Korea’s newly elected president – Yoon Suk-yeol – displayed a pro-crypto stance during his campaign. Among his ideas is increasing the minimum threshold for paying capital gains tax on profits from digital asset investments.

Crypto Community Welcomes the New President

Last week’s presidential election in South Korea was the most contested in the East Asian country’s history. The candidate of the Conservative party – Yoon Suk-yeol – collected only 263,000 votes more than his opponent – the Democratic Party’s Lee Jae-myung. The winner, who will officially step into office in May, labeled his win a “victory of the great South Korean people.”

During his campaign, Yoon showed he is a keen supporter of the cryptocurrency industry numerous times. Initially, he promised to allow initial coin offerings (ICOs). In another appearance, the former prosecutor said that those who generate profits of less than $40,000 per year from crypto trading will be exempt from paying taxes. Currently, such taxes are imposed on profits generated above $2,000 per annum.

Korea Blockchain Association – a lobby group for digital asset exchanges – predicted that the new president will positively impact the local cryptocurrency ecosystem. Speaking on the matter was Secretary-General Yoon Seong-han:

“We definitely welcome his stance as he is confident about boosting the industry. As ICOs are banned now, we have no choice but to issue coins in Singapore and other countries. Ventures and startups will be able to raise money easily from investors [if the ban is lifted].”

Anndy Lian – Chairman of BigONE Exchange – welcomed Yoon’s viewpoint, too: “He understands the importance of crypto. He understands the future, and it is unstoppable.”

It is worth noting that private digital assets are highly popular among South Koreans, as the most enthusiastic demographic group are those in their 30s. A recent study revealed that around 15% of local crypto holders had allocated more than $8,000 each in the asset class.

It Is Time for South Korea to Embrace Crypto

Not long ago, Sohn Byung-doo – CEO of Korea Exchange (KRX) – argued that the country needs to study and explore ways to embrace the cryptocurrency sector.

The exec outlined there are around five million local investors, while the daily market trading volume is about $12 billion. If the nation does not engage further with the asset class, it could fall behind other countries that have already opened their arms to it: