Hong Kong Tightens Crypto OTC Trading with New Licensing System
1min read Hong Kong is set to introduce a licensing system for cryptocurrency over-the-counter (OTC) trading, aiming to enhance regulatory oversight and combat money laundering. The move, announced by Hong Kong Legislative Councilor Wu Chi-wai, will require OTC entities to comply with the Anti-Money Laundering Ordinance (AMLO).
The licensing system, expected to be implemented this year, will align Hong Kong's cryptocurrency regulations with international AML standards. OTC entities will be limited to spot trading between virtual assets and fiat currency, and will be required to register and monitor business wallets and transaction records. The Secretary for Security will oversee licensing approval, routine inspections, and enforcement, with penalties of up to HK$1 million or two years' imprisonment for violations.
The Hong Kong OTC market is extensive, with around 100 exchanges, hundreds of cryptocurrency ATMs, over 200 OTC exchange stores, and 250 active online trading service providers. Most of these trading activities are currently unregulated, posing various risks. The new licensing system aims to address these risks and protect investor interests.
To prevent money laundering and fraud risks, the SAR government recommends that OTC entities verify customer identities, assess and document the nature and purpose of transactions, and continuously monitor transaction activities. The licensing system will help ensure market security and standard operations, aligning with international AML standards.
