On 21 May 2021, Hong Kong’s Financial Services and Treasury Bureau (the FSTB) published its Consultation Conclusions1 on legislative proposals to enhance anti-money laundering and counter-terrorist financing (AML/CTF) regulations in Hong Kong (Consultation Conclusions) in respect of Hong Kong virtual asset service providers (VASPs). These Consultation Conclusions are in response to the FSTB’s consultation paper2 issued in November 2020 proposing a new licensing regime for VASPs in Hong Kong. For a detailed discussion of the consultation paper, please see our newsletter FSTB Consults on Proposed Licensing Regime for Virtual Asset Exchanges.3
To address the AML/CTF risks posed by virtual assets (Virtual Assets), the Financial Action Task Force (FATF) now requires jurisdictions to regulate VASPs for AML/CFT purposes and to supervise their compliance. The FSTB proposes to follow the requirements of the FATF through the introduction of a licensing regime in Hong Kong for VASPs and certain miscellaneous technical amendments under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO). The FSTB proposed establishing a licensing regime under the AMLO for VASPs in Hong Kong, which would require any person wishing to operate a virtual asset exchange (Virtual Asset Exchange) in Hong Kong to apply for a licence from the Securities and Futures Commission (SFC). It is proposed that licensed VASPs would be subject to the AML/CTF requirements under Schedule 2 to the AMLO and other regulatory requirements.
The Consultation Conclusions also outline the FSTB’s responses to the proposal to introduce a two-tier registration regime for dealers in precious metals and stones, which is not covered in this newsletter.