Hong Kong Unlicensed Operation of Virtual Asset Trading and Custody Services Could Lead to 7-Year Maximum Sentence

According to Ming Pao, the Hong Kong Securities and Treasury Bureau has released a consultation paper proposing to establish a licensing system for providers of digital assets (virtual assets) trading and custody services. The paper mentions that operators of virtual asset services, whether small-scale such as virtual currency trading, withdrawals, or fiat currency exchanges, or complex activities like brokerage and large-scale transactions, will be required to apply for a license from the Securities and Futures Commission. This means that over-the-counter (OTC) platforms for virtual assets will be brought under regulation, with stricter requirements compared to last year's consultation on OTC platforms applying for licenses from the Customs Department. Additionally, the consultation paper states that there will be no transitional period once the law is in effect, and operators found to be operating without a license could face a maximum fine of 5 million Hong Kong dollars and a 7-year prison sentence.

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