Key points:
- Hong Kong implements stringent regulatory norms to restrict over-the-counter (OTC) providers.
- While the OTC platforms play a significant role in crypto transactions, they are suspected of promoting illegal crypto activities.
- The new rules are expected to lead to consolidation and a reduction in the use of OTC platforms in illegal crypto trades.
Hong Kong has reportedly initiated the implementation of stringent regulatory norms restricting over-the-counter (OTC) providers in an attempt to reduce illicit crypto trading activities. Chengyi Ong, APAC policy head at Chainalysis, commented that the regulatory framework would lead to “consolidation and a reduction” in malicious actors’ use of OTC platforms.
According to Chainalysis data, around 450 shops, ATMs, and other online platforms across Hong Kong have been facilitating OTC crypto trades. While these platforms play a major role in digital transactions throughout the city, they are also suspected of promoting banned crypto activities. Carlton Lai, Head of Blockchain Research at Daiwa Capital Markets, commented,
The decentralized nature of crypto makes the industry very hard to regulate. There are numerous crypto exchanges and apps based offshore that users can easily access without oversight from the government.
Fostering Hong Kong’s vision of establishing a crypto hub, the Financial Services and the Treasury Bureau began scrutinizing OTC crypto trades. The regulatory body’s initiative focused on preventing money laundering, terrorism financing, and fraudulent activity. As per Ong, the novel OTC framework will help to “better manage crime, cybersecurity, and other operational risks.”
The Financial Services and the Treasury Bureau devise the regulatory framework under the customs department. A spokesperson commented that the customs department is the most appropriate authority to scrutinize the OTC service providers. The rules will necessitate these providers to mandate customer-record-keeping practices and strengthen the workforce.
Crypto advisor Vince Turcotte posited that OTC transaction regulation is a “natural extension” of the already existing regulatory framework. Turcotte added, “The primary impact will be to further legitimize the market in Hong Kong.”
Read More: Hong Kong’s New Crypto Policies Tackle Illicit OTC Crypto Trade
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