The Chinese special territory of Hong Kong has announced new regulations for cryptocurrency exchanges currently operating in the city district. The new approach list new sets of compliance initiatives for these exchanges including Know-Your-Customer (KYC) protocols and Anti-Money-Laundering (AML) initiatives. The move was initiated by Securities and Futures Commission (SFC).
According to Chief Executive Ashley Alder who announced the move at a local fintech event:
“A platform operator should comply with the KYC requirements which are applicable to a licensed corporation. It should take all reasonable steps to establish the true and full identity of each of its clients, and of each client’s financial situation, investment experience and investment objectives.”
In addition, the new rules also dictate that the exchanges can offer services to only professional investors who will be required to have a monthly report ready to file to the commission. The exchanges are also now being required to offer products that are approved by the regulatory authority and only store up to 2% of total funds in hot wallets to protect traders.
These are sweeping reforms that will probably be a major point of contention between the governments and the exchanges in the months to come. Hong Kong is home to some of the largest cryptocurrency exchanges in the world including Bitfinex and Binance that see billions of dollars worth of trading activity every month.
The first set of regulations was passed back in November 2018. Now the regulator is now aiming to take another step forward and rein in the exchanges.
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