Hong Kong’s consultation period for licensing over-the-counter (OTC) cryptocurrency trading platforms concluded on April 12th, leaving industry participants with lingering questions about the regulatory framework’s scope and implementation. While the consultation paper focused solely on Bitcoin and Ethereum, industry voices are advocating for the inclusion of stablecoins like Tether (USDT) and USD Coin (USDC) within the regulatory ambit. Additionally, concerns have been raised regarding the proposed implementation of stringent Know Your Customer (KYC) requirements for transactions below HK$8,000 (roughly equivalent to $1,000 USD).
The lack of clarity surrounding the treatment of stablecoins within the licensing framework has emerged as a key point of contention. Stablecoins are cryptocurrencies pegged to the value of traditional assets, such as the US dollar, and are widely used by investors to facilitate transactions and hedge against market volatility. Industry representatives argue that excluding stablecoins from the licensing regime would create an uneven playing field and potentially stifle innovation within the Hong Kong cryptocurrency ecosystem.
Another major concern for OTC platforms pertains to the proposed KYC requirements for relatively low-value transactions. The consultation paper mandated the implementation of KYC procedures for all OTC transactions, irrespective of the amount involved. Industry participants argue that such a stringent approach would impose an undue burden on both platforms and customers, potentially hindering the growth of the OTC market. They propose a risk-based approach to KYC, suggesting that stricter verification measures should only be applied to transactions exceeding a certain threshold.
The Hong Kong government’s initiative to regulate OTC cryptocurrency trading platforms signifies its recognition of the growing importance of the digital asset industry. However, the current framework appears to lack comprehensiveness, potentially hindering its effectiveness. By addressing industry concerns regarding stablecoin inclusion and KYC implementation, Hong Kong can establish a regulatory environment that fosters innovation and responsible growth within its OTC cryptocurrency market.
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This article first appeared on The WIRE and is brought to you by Hyphen Digital Network
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