The China Securities Regulatory Commission (CSRC) today issued a consultation summary on the “Regulations on the Supervision and Management of Virtual Asset Trading Platform Operators Applicable to Obtaining Licenses from the CSRC” (Note 1).
During the consultation period, the CSRC received 152 opinion letters from industry and professional organizations, professional and consulting firms, market participants and individuals, licensed law firms, and other stakeholders. Respondents generally welcomed the proposed regulations, while several respondents requested that the CSRC make them public. After considering a wide range of intentions and suggestions, the CSRC has modified or publicly formulated the regulations.
The vast majority of respondents agreed with the CSRC’s proposal to allow licensed trading platform operators to provide services to retail investors. The CSRC will implement a series of measures to protect such investors, including ensuring compliance in the process of establishing relationships with customers, good management, enhanced token due diligence, compliance standards and disclosure.
Ms. Leung Fung-yee, Executive Director of the CSRC, said: “Providing clear monitoring periods can promote responsible development. Hong Kong’s comprehensive virtual asset monitoring framework follows the principles of ‘same business, same risk, same rules’, which provides good protection and controls major risks for investors, thus promoting the sustainable development of the industry and supporting innovation.”
The “Guidelines for Virtual Asset Trading Platform Operators” will take effect on June 1, 2023 (Note 2). The guidelines explain various standards and regulations applicable to licensed trading platforms, including smooth asset protection, segregated customer assets, avoidance of conflicts of interest, and network protection. The CSRC will provide additional guidelines on the new regulatory requirements, other implementation details (including license application procedures), and transition arrangements.
The CSRC welcomes virtual asset trading platform operators who are ready to comply with CSRC risk standards to apply for licenses. As for operators who are not interested in applying for a license, they should start to rationalize their business in an orderly manner in Hong Kong.
The CSRC will continue to work with investors and the Financial Education Committee to remind investors of the risks of investing on unregulated platforms. In particular, although the degree of control will take effect on June 1, 2023, the CSRC has not approved any virtual asset trading platforms to provide services to retail investors, and most virtual asset trading platforms accessible to the public do not accept proof of CSRC supervision.
The China Securities Regulatory Commission (CSRC) issued a consultation paper on February 20, 2023, regarding suggested regulatory measures for virtual asset trading platform operators to obtain licenses from the Securities and Futures Affairs Supervision Board. The consultation period ended on March 31, 2023. The proposed regulatory measures cover prudent asset protection management, know-your-customer procedures, combating money laundering/terrorist financing, avoiding conflicts of interest, guidelines for including virtual assets for trading, preventing market manipulation and illegal activities, accounting and valuation, risk management, and cybersecurity.
The CSRC will publish guidelines for virtual asset trading platform operators, “Combating Money Laundering and Terrorist Financing” (applicable to licensed corporations and virtual asset service providers licensed by the CSRC), “Guidelines for Licensed Corporations and Virtual Asset Service Providers with Contacting Entities to Stop Money Laundering and Terrorist Financing for Virtual Asset Services” and “CSRC Disciplinary Fines Guidelines” in the Constitutional Daily on May 25, 2023.
The CSRC will publish the application form for licenses under the “Securities and Futures Regulations” and the “Combination Regulations for Combating Money Laundering and Terrorist Financing” for relevant licenses for virtual asset trading platforms in the Constitutional Daily on May 25, 2023, and will begin accepting applications on June 1, 2023.