This regulation will expand the SFC’s role in regulating securities and futures markets, including oversight of companies offering crypto OTC trading services. As part of the new regulation, the SFC will cooperate with the Customs and Exotic Affairs Department (C&ED) to regulate and supervise such services.

According to the South China Morning Post, the planned regulations and licensing processes were initially to be handled solely by C&ED. This regulation was developed in line with a proposal made public in February.

However, under this proposal, regulation and licensing of OTC services became a process in which the SFC was involved. OTC trading services allow users to buy and sell cryptocurrencies privately, meaning greater privacy and potentially better prices.

Those who want to learn how crypto OTC trading works and what advantages these services offer can take a look at Cointelegraph’s guide.

The SFC has recently begun discussions with existing OTC trading service providers on whether to introduce a new licensing regulation for cryptocurrency custody services.

This new licensing regulation is designed to enable investors and users to store their crypto assets more securely. These licensing processes are still in the early stages and detailed discussions are ongoing, SCMP reported.

The SFC also published an “alert list” identifying “suspicious virtual asset trading platforms” operating without a license in Hong Kong. This list includes suspicious websites or unlicensed entities detected as of January 2020. SFC stated that such platforms may target Hong Kong investors and emphasized that investors should avoid such risks.

Hong Kong is taking various steps to position itself as a global cryptocurrency hub and attract the digital asset industry. As of June 1, 2024, it has become a crime to operate an unlicensed virtual asset trading platform (VATP) in Hong Kong. This regulation aims to provide greater regulation and control in the market.

There are currently two fully licensed virtual asset trading platforms in Hong Kong: Hash Blockchain and OSL Digital Securities. Other crypto exchange platforms have not yet received full operating licenses.

These platforms include Crypto.com, Bullish, HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin and Matrixport HK. OSL has not yet responded to Cointelegraph’s request for comment.

These new regulations and licensing processes aim to strengthen Hong Kong’s regulatory role in cryptocurrency markets and protect investors. It also aims to bring greater trust to the industry through licensed and regulated platforms.

These steps could increase Hong Kong’s credibility in the cryptocurrency ecosystem and support its potential as an attractive market for global investors.