HK Cracks Down on Non-Compliant Crypto Businesses and Advertising Content Has Caused a Chilling Effect
The Hong Kong Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 is being amended for approval. It has a richer regulatory interpretation of cryptocurrencies. The industry expects it to come to fruition next year. But the effects are already evident: a large number of crypto advertisements that used to be on the streets of Hong Kong have disappeared without a trace. non-compliant exchanges such as FTX BITMEX, which used to use Hong Kong as their headquarters, have now moved out. OSL、 Hashkey、Huobi and others have applied or are in the process of applying for relevant licenses.
Source:
https://www.legco.gov.hk/cn/legco-business/council/bills.html?bill_key=10015&session=2022
TL;DR:
1、Licence required for carrying on VA service business
A license is required if a person carry on a business of providing any VA service; or hold itself, himself or herself out as carrying on a business of providing any VA service. A person who without reasonable excuse, contravenes the requirement commits an offence and is liable on conviction on indictment to a fine of $5,000,000 and to imprisonment for 7 years.
2、Offence to issue advertisements relating to unlicensed person’s provision of VA service
Focus on the key points, a person who commits an offence is liable on conviction to a fine at level 5 and to imprisonment for 6 months.
3、Offence involving fraudulent or deceptive devices etc. in transactions in virtual assets
A person commits an offence if the person, directly or indirectly, in a transaction involving any virtual assets, employs any device, scheme or artifice with intent to defraud or deceive; or engages in any act, practice or course of business that is fraudulent or deceptive, or would operate as a fraud or deception, is liable on conviction on indictment to a fine of $10,000,000 and to imprisonment for 10 years.
4、The SFC may, upon application, add, exempt or otherwise modify the virtual asset services for which a licensed provider or licensed representative is licensed.
5、Meaning of Virtual Assets(VA)
Virtual Assets(VA):to be used or intended to be used as a publicly acceptable medium of exchange for one or more of the following purposes: payment for goods or services; discharge of a debt; investment; provides rights, eligibility or access to vote on the management, administration or governance of the affairs in connection with, or to vote on any change of the terms of any arrangement applicable to, any cryptographically secured digital representation of value; can be transferred, stored or traded electronically.
A digital representation of value is excluded from the definition of VA if it is issued by a central bank or by an entity that performs the functions of a central bank or by an entity authorized by a central bank on its behalf; or by a government of a jurisdiction, or by an entity authorized by the government of a jurisdiction and acting pursuant to an authority to issue currency in that jurisdiction. It is a limited purpose digital token;constitutes securities or a futures contract;constitutes any float or SVF deposit of a stored value facility.
6、Meaning of Limited Purpose Digital Token
Limited Purpose Digital Token means a customer loyalty or reward point; an in-game asset; or any digital representation of value that is similar to a customer loyalty or reward point or an in-game asset; and is not intended by its issuer to be convertible into money or another medium of exchange accepted by the public.
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