According to the Hong Kong Securities & Futures Professionals Association (HKSFPA), the city’s plan to introduce fresh crypto licensing regimes may inadvertently lead to compliant crypto managers stopping their activities should regulators move on with it in a hasty manner and without any transitional arrangements.
The caution is based on the possibility of a “hard start”, where existing companies must have a full license from the commencement date or
stop regulated activities while waiting for their applications to be reviewed.
At present, Hong Kong’s Securities and Futures Commission, together with the Financial Services and Treasury Bureau, is seeking views on new
licensing regimes encompassing virtual asset dealing, advisory and management
services, over and above the existing framework for crypto trading platforms
within the city.
Although in support of increased monitoring, the group
cautioned that introduction of such measures without transition arrangements
could lead to operational bottlenecks, disrupt fund management activities and
undermine business continuity for those already in the market.
The industry body has proposed a deeming period of
six to twelve months.
The industry group recommended that there should be a deeming
or grace period for existing practitioners who submit license applications
before the commencement of the new regime.
It said that failure to include transition provisions posed a
risk of compelling legitimate managers to suspend their operations pending
approval, especially considering the complicated nature of the application
process and the likelihood of regulatory delays.
“Legitimate businesses may be forced to suspend operations
while awaiting approval,” wrote HKSFPA. “We strongly urge the government to
implement a 6 to 12-month deeming period for existing practitioners who submit
their applications before, the commencement date.”
The commencement date for these new virtual asset regimes is
not yet fixed as they are still under consultation.
Industry body cautions that strict deadlines may
slow adoption.
Apart
from the hard-start issue, the consultation also covered broader changes in the
perimeter of crypto regulation, such as the introduction of new requirements for
advisory and management services.
It stated in its submission that it supports Hong Kong’s
attempts to incorporate digital assets into the financial system.
Nonetheless, it cautioned that compliant firms might stay
away or fail to get into institutional adoption due to lack of transitional
arrangements and strict implementation timelines.