Standards for Virtual Asset Service Providers (VASPs)for its acronym in English) in Hong Kong are “incredibly high”given that the Securities and Futures Commission (SFCfor its acronym in English) wants the cryptocurrency industry to hold itself to the same compliance standards as traditional finance companies (TradFi).
Speaking to Cointelegraph at the Hong Kong WOW Summit, Lucy Gazmararian, founder of crypto venture firm Token Bay Capital and a member of the SFC Fintech Advisory Group, explained that while “the bar is high”, it is in place for a “good reason”.
“The standards are incredibly high because the focus [de la SFC] is to ask VASPs to apply the same standards that existing financial institutions, such as large banks and large asset managers, have to meet.”
On February 20, the SFC published a consultation document questioning whether authorized virtual asset service providers should serve small investors and what protection measures should be imposed on them.
Anti-money laundering and “know your customer” policies were also discussed.
Gazmararian said that these high standards could pose challenges for the cryptocurrency industry in Hong Kong in the short term.
“The problem is that cryptocurrency companies are usually in the startup phase”he explained. “Many have funding, but not huge amounts, not hundreds of millions.”
“Compliance with the framework carries significant costs”he added, citing the need for local VASPs to have insurance, independent assessment reports, and store cryptocurrency offline.
“One criticism has been that if you’re a cryptocurrency startup, how can you even get started? Is that going to choke the industry?”
With a strong regulatory framework, Gazmararian believes more well-capitalized financial firms will be willing to help promising startups get off the ground..
“I think that the companies that obtain the license will comply with the strictest regulationss, so the bar is set very high, but I think for good reason,” Gazmararian said.
“Cryptocurrency platforms are part of the entire Web 3.0 ecosystem, and we strongly support the development of the entire Internet ecosystem.
— ivanferrari.eth.zk (@ferrarivarese) April 3, 2023
“Cryptocurrency platforms are part of the entire Web 3.0 ecosystem, and we strongly support the development of the entire Internet ecosystem.”
The SFC encouraged individuals, corporations, and cryptocurrency companies to review the 361-page consultation document and provide feedback..
The securities regulator wants these entities to share their views and point out things that may have been overlooked because they are “absolutely focused” on doing everything right, Gazmararian explained.
The deadline for submitting comments on the consultation document ended on March 31.
In recent months, Hong Kong has made considerable strides in establishing itself as the next global cryptocurrency hub.
More than 80 digital asset companies have expressed interest in establishing a presence in Hong Kong in recent months.according to a March 20 statement from Treasury and Financial Services Secretary Christian Hui.
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