Everyone knows Hong Kong has a free market approach to startups and businesses and their lax regulatory oversight regarding the financial markets. This has led to a pile of cryptocurrency startups, businesses, and exchanges to base their operations in the city-state.
However, due to money laundering fears, fraudulent activities, and a lack of regulatory oversight, the Securities and Futures Commission (SFC) is tightening their regulatory grip on the Hong Kong cryptocurrency industry.
According to a report issued by the Nikkei Asian Review, the SFC plans to introduce stricter regulatory policies to Hong Kong’s cryptocurrency industry, specifically for startups and crypto exchanges.
Why Increase Regulations Now?
The change in regulatory approach from the SFC is largely to do with the fraudulent activities and suspected money laundering concerns associated with initial coin offerings (ICOs).
In November 2018, the Hong Kong government established a fintech “sandbox” to assess the effects of crypto businesses operating in the city.
The SFC then determined a need for greater oversight and passed a guideline stating that investment funds with over 10% of their assets in cryptocurrencies or crypto-related businesses must obtain a license.
This regulatory change is the first of more to come and should help to prevent fraud in the industry.
Increased Cryptocurrency Regulations
Hong Kong is not the only country to increase their regulatory stance on cryptocurrencies. Different jurisdictions all over the world have introduced new laws and regulatory oversights to protect investors and reduce fraud and money laundering in the space.
For instance, in the United States, two U.S. congress members have introduce new bills to combat crypto price manipulation. The bills urge the CFTC and other U.S. regulators to take action in coming up with regulations to protect both consumers and businesses operating in the space.
On a more grand scale, the latest G20 summit in Buenos Aires, Argentina saw leaders from around the world sign a joint declaration to develop a regulatory framework for cryptocurrencies in accordance with Financial Action Task Force (FATF) standards.
It’s clear that regulators around the world are taking the crypto industry seriously by attempting to protect investors and market participants with regulatory oversight.
However, there are jurisdictions who have taken a step back and let the industry regulate itself.
One country taking this approach is Japan, which turned over the responsibility of regulation to the Virtual Currency Exchange Association (JVCEA), as opposed to traditional financial regulators.
Overall, there is serious regulation happening in the cryptocurrency space and it’s clear that the industry is maturing.
When the next crypto bull run takes place, the industry should be far better prepared to deal with issues such as fraud, manipulation, and money laundering.
Do you think traditional financial regulators should oversee the crypto markets? Or should the crypto industry be self-regulating? Let us know what you think in the comment section below.