Hong Kong issues its first cryptocurrency license, which can only provide services to professional investors or institutions
Hong Kong has issued its first cryptocurrency license.Original Title: "Hong Kong Issues First Cryptocurrency License Limited to Professional Investors Over 8 Million, Will Beijing Refer to This?"
Original Source: Wu Says Blockchain
On December 15, BC Technology Group (863.HK) announced that its OSL exchange has obtained the first virtual asset license issued by the Hong Kong Securities and Futures Commission, with license types being Type 1 securities trading and Type 7 automated trading services. This means that Hong Kong has issued its first cryptocurrency license.
In August 2020, the Hong Kong Securities and Futures Commission had in principle agreed to issue a license to OSL Digital Securities. OSL stated that in addition to the Hong Kong license, it has formally applied for a digital asset license from the Monetary Authority of Singapore under the Payment Services Act.
The Hong Kong Securities and Futures Commission clearly stated in its "Position Paper" issued on November 6, 2019, that online trading platforms for digital assets fall under the jurisdiction of the Commission if they offer at least one type of security token trading on their platform, and must obtain a Type 1 (securities trading) and Type 7 (provision of automated trading services) regulated activity license.
Type 1 regulated activities involve securities trading, primarily providing clients with buying/selling/brokerage services for stocks and stock options; buying and selling bonds for clients; and buying/selling mutual funds and unit trust fund placements and underwriting securities for clients. Typically, securities firms and investment consulting companies hold this license. Type 7 regulated activities involve providing automated trading services, building electronic trading platforms that match client buy and sell orders. Both Type 1 and Type 7 licenses require more than two institutional heads with relevant industry qualifications or equivalent experience; the company must be a Hong Kong company or a foreign company registered in Hong Kong, and must have corresponding directors and responsible personnel.
OSL emphasized that once the platform is officially launched, clients can trade high-quality cryptocurrencies through OSL's secure and compliant platform, including Bitcoin (BTC), Ethereum (ETH), and rigorously selected security tokens (STOs). OSL stressed that clients must go through strict KYC and anti-money laundering compliance processes; to prevent market misconduct, OSL will use market monitoring, transaction surveillance, and other preventive measures for digital assets.
However, OSL's license cannot provide services to retail investors and is only available to professional investors or institutions, with individual assets of no less than 8 million Hong Kong dollars and institutional assets of no less than 40 million Hong Kong dollars. If you are one of the investors, you not only need to meet the above requirements but also need to have a Hong Kong bank account and can only trade in Hong Kong dollars.
According to Hong Kong law, professional investors are defined as 1. Trust corporations that manage assets of no less than 40 million Hong Kong dollars or equivalent foreign currency; 2. Individuals with a total investment portfolio of no less than 8 million Hong Kong dollars or equivalent foreign currency; 3. Corporations or partnerships with an investment portfolio of no less than 8 million Hong Kong dollars or equivalent foreign currency or assets of no less than 40 million Hong Kong dollars or equivalent foreign currency; 4. Corporations whose sole business is holding investments and are wholly owned by individual professional investors.
Unlike Japan and Singapore, Hong Kong currently does not have a dedicated legal system for the virtual asset industry, but instead issues corresponding licenses within the virtual asset framework based on existing financial service licenses for companies applying for virtual asset licenses.
The regulatory framework for virtual assets in Hong Kong has the following characteristics:
Licensed platforms can currently only open trading to professional investors
Supports the issuance of security tokens
Fiat currency and virtual assets must be stored separately, and customer hot and cold wallets must have insurance coverage
Customers can use investor protection mechanisms under the traditional financial system and can also enjoy special protection measures for virtual assets introduced by the Hong Kong Securities and Futures Commission
Has strict KYC/anti-money laundering processes
Huobi (1611.HK) and OKEx (1499.HK) have also disclosed their progress in applying for licenses and related certificates in Hong Kong on the Hong Kong Stock Exchange's disclosure website. However, Huobi and OKEx are applying for licenses and certificates within the traditional financial framework, not within the virtual asset regulatory framework, which means they cannot engage in virtual asset trading platform business.
Huobi announced in August that its Huobi Wallet obtained a trust or company service provider license, and Huobi Asset Management obtained Type 4 (providing advice on securities) and Type 9 (providing asset management) regulated activity licenses; OKEx announced in June that its subsidiary obtained a certificate of registration as a Hong Kong trust company.
Wu Says Blockchain previously pointed out that Huobi and OKEx primarily engage in retail business. If they decide to accept regulation under Hong Kong's virtual asset framework, they will need to make significant strategic adjustments, at least for the institutions applying for licenses in Hong Kong, which will have to give up the lucrative retail segment.
It is worth noting that just five days ago, on December 10, Singapore's second-largest sovereign wealth fund, Temasek Holdings, announced that DBS Bank would launch a cryptocurrency exchange, offering trading in four fiat currencies (Singapore Dollar, US Dollar, Hong Kong Dollar, Japanese Yen) and four of the most mature cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash, and Ripple). At the same time, the exchange will also provide custody services for cryptocurrencies. On December 11, BC Group announced that it had entered into a service agreement with DBS Bank to provide several technical services.
BC Group's executive director is known as "Hong Kong Shell King" Gao Zhenshun. According to New Fortune, it is rumored that this financial expert born in 1951 from the "Fujian Gang" was originally just a "small tailor" in Tsim Sha Tsui, Hong Kong, later switched to foreign exchange, and, with exceptional financial skills, transformed into a financial talent, accumulating considerable wealth and collaborating with figures such as Jack Ma, Huang Guangyu, Xu Zheng, and Ning Hao.
Beijing and Hong Kong's financial sectors have always maintained close communication; for example, the STAR Market's launch previously referenced the reforms of the Hong Kong Stock Exchange. Earlier, central bank officials revealed that they were considering incorporating ICOs into the Securities Law, and the central bank's law recently reiterated the prohibition of issuing tokens, but also left room for trading virtual goods like Bitcoin. Whether Beijing will refer to Hong Kong's actions in the future is something to look forward to.
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