The Hong Kong authorities have decided to bolster its grip on digital assets by boosting its Financial Action Task Force (FATF)-recommended anti-money laundering (AML) and counter-terrorist financing (CTF) compliances.
Revealed by Financial Secretary Paul Chan in his annual budget speech on Wednesday, the new regulations will target the virtual asset service providers, better known as VASPs, operating in its jurisdiction.
“Hong Kong is the first jurisdiction in the Asia-Pacific region having successfully passed the FATF assessment,” Chan said in his speech. “The Government will further enhance Hong Kong’s AML/CTF regime having regard to the recommendations of the evaluation report, and consider incorporating virtual asset service providers and dealers in precious metals, stones, and jewelry into the AML/CTF regulatory framework.”
The regulator will consult about these new regulations with the public and industry experts and is planning to come up with “detailed proposals” later this year.
A favorable jurisdiction for crypto startups
Hong Kong is one of the key Asian jurisdictions for the crypto industry, as many companies are based in and are operating from the jurisdiction. This includes crypto exchanges, OTC desks, and brokers.
“[Authorized institutions] should keep abreast of international and local developments to maintain an up-to-date understanding of risks, and apply a risk-based approach that supports responsible financial innovation as well as effective ML/TF risk management,” Carmen Chu, HKMA’s AML enforcer, said earlier.
Last November, Hong Kong’s Securities and Futures Commission (SFC) introduced a new framework to regulate the digital asset exchanges operating under its jurisdiction.
The FATF updated its guidance in June 2019 to specifically include virtual currencies and recommended regulators to maintain sender and receiver information in transactions above a certain threshold.
Hong Kong has also received praise from the FATF, which labeled the jurisdiction as “largely compliant” with its recommended AML/CTF compliance rules for emerging technology markets, including digital currencies.