Hong Kong’s New Crypto Regulations are facing some amendments in the regulatory framework, especially concerning over-the-counter transactions in virtual asset trading services.

According to some recent South China Morning Post reports, the Securities and Futures Commission and the Customs and Excise Department may work parallel to overlook the crypto sector.

The abovementioned changes would mean significant change from the current structure where the C&ED is responsible for OTC services. These services facilitate large private Crypto Currency transactions that do not necessarily need to go through Public Exchanges.

The South China Morning Post pointed out that the SFC may regulate OTC as part of its role in overseeing all financial markets which could add more clarity to the crypto space.

A few sources of information made known the fact that the SFC officials have already proposed the new licensing framework to some stakeholders in the industry.

These regulatory changes will involve the SFC and the C&ED with the hope of addressing issues of responsibility of the two agencies.

Apart from regulating OTC trading services, SFC is also exploring the idea of a licensing framework for crypto custodian services which is one of the key segments of the market.

SFC Eyes Stricter Oversight of OTC Crypto Transactions

Particularly, the growing loss from the field due to the impact of cryptocurrencies and the increasing instances of fraud have forced Hong Kong to shift to a stricter regulation of cryptocurrency.

The failure of JPEX has especially led authorities to investigate OTC services that are crucial in facilitating and directing retail investors’ money to unlawful activities.

It also pointed out that many of these services have physical shops and some of them are involved in scams hence the call for increased supervision.

Although there are persuasive reasons for doing so, there are still apprehensions about the way that the regulation will be effected on the OTC crypto sector.

Many industry members are unsure why OTC shops are regulated by the C&ED which is responsible for the money changer while the SFC takes care of other aspects related to crypto investments.

But the Financial Services and Treasury Bureau (FSTB) said that its two-month public consultation on the new rules garnered ‘overwhelming support’. While the detailed findings are still in the process of being released the bureau is currently studying the regulation from the feedback received.