In a move aimed at regulating the burgeoning cryptocurrency market, the Hong Kong government is progressing towards implementing licensing frameworks for stablecoin issuers and over-the-counter (OTC) crypto trading services.
The initiative, spearheaded by Christopher Hui, Secretary for Financial Services and the Treasury, underscores the administration’s commitment to fostering a structured and secure environment for digital asset transactions.
Licensing bills underway for stablecoins and OTC crypto trading
Following recent consultations initiated by the Financial Services and the Treasury Bureau (FSTB), the government is poised to introduce licensing bills for stablecoin issuers and OTC crypto trading platforms.
The FSTB launched a public consultation on legislative proposals for licensing OTC crypto trading services, with the process slated to conclude on April 12. Simultaneously, a separate consultation, conducted jointly by the FSTB and the Hong Kong Monetary Authority (HKMA), focuses on regulating stablecoin issuers.
The proposal mandates all fiat-referenced stablecoin issuers to obtain a license from the HKMA, enhancing oversight and accountability within the sector.
Rising crypto-related crime cases
Despite strides towards regulatory clarity, Hong Kong has witnessed a surge in crypto-related criminal activities in recent years, as highlighted by Secretary Hui. According to official figures, the city reported 3,415 crypto-related criminal cases in 2023, a significant escalation from 2,336 cases in 2022 to 1,397 cases in 2021.
Monetary involvement in these illicit activities also escalated, reaching nearly HK$4.4 billion ($562.6 million) in 2023, up from HK$1.7 billion in 2022 and HK$824 million in 2021.
Stringent measures against bad actors
Amid efforts to position Hong Kong as a crypto hub, regulatory authorities remain vigilant in curbing malpractices within the industry. Notably, the government took decisive action against the JPEX crypto exchange in the preceding year, leading to the arrest of 70 individuals associated with the platform as of February 20.
Despite the crackdown, no prosecutions have been initiated, signaling the administration’s unwavering stance against entities deemed detrimental to the market’s integrity.
