Hong Kong Unveils Universal Anti-Money Laundering Measures For OTC Crypto Traders

The regulatory measures governing over-the-counter (OTC) Crypto trading in Hong Kong are set to undergo heightened scrutiny, aligning them with the same stringent requirements applied to retail digital asset trading.

Today, the government released the ‘Public Consultation on Proposed Legislation for the Oversight of Over-the-Counter Trading in Virtual Assets,’ with the consultation period extending until April 12.

The central proposal put forth in the document advocates for the integration of over-the-counter (OTC) transactions into the purview of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), commencing in June 2023. OTC transactions, characterized by direct dealings between the service provider and the client sans a centralized marketplace like an exchange, would fall within the regulatory framework.

The governmental recommendation advises incorporating solely “direct exchange of virtual assets for monetary transactions” within the OTC classification. Concurrently, the trading of virtual assets will continue to fall under the purview of a conventional virtual assets trade provider (VATP) license. Peer-to-peer transactions will likewise remain beyond the ambit of OTC.

As per official records, approximately 200 brick-and-mortar VA OTC establishments, encompassing ATMs, exist alongside roughly 250 digital platforms or currently active online listings facilitating the exchange of VA services in Hong Kong.

Crypto Trading Compliance Guidelines

The proposed regulation mandates that over-the-counter (OTC) traders adhere to requirements akin to those imposed on other virtual asset service providers.

This involves obtaining a license from the Commissioner of Customs and Excise and disclosing details such as the local management office’s address, a correspondence address, and the location designated for local storage of books and records.

However, Licensees can only move their stuff from their official wallets to a customer wallet. Customers need to show they own and run their wallets.

OTC trade­rs can’t deal with virtual assets you don’t find on retail VATPs or stable­coins. However, they can’t use ones that don’t have­ okay from the Hong Kong Monetary Authority eithe­r.

A significant announcement from the Hong Kong government’s financial services department on February 2 set a deadline for unlicensed Virtual Asset Service Providers (VASPs), stating that those lacking approval must cease operations by May 31.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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