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According to recent updates on its website, Hong Kong’s Virtual Assets Regulator has approved 11 cryptocurrencies to continue operating there pending a full license.
The Securities and Futures Commission of Hong Kong (SFC) on 3 June updated its website to indicate that the 11 crypto exchanges that have applied to operate under Hong Kong’s regulatory regime for virtual asset trading platforms (VATPs) are now “deemed to be licensed”. Among the 11 exchanges are major platforms Crypto.com and Bullish, which will be able to continue operating in Hong Kong for the time being now that the June 1 deadline for applicants to stop trading locally unless approved by the regulator has passed.
The 11 exchanges that the SFC now “deems licensed” are not fully approved – they must await final approval of their full application before they can be sure of their long-term status in Hong Kong. But the conditional approval comes as a relief to many industry watchers a week after several other major global exchanges withdrew their applications from considerationleading some observers to question whether Hong Kong would offer a welcoming environment for cryptocurrency firms.
To date, only two VAPTs have received full approval from the SFC – OSL Exchange and HashKey Exchange. Many industry observers have expressed hope over the past year that Hong Kong could become an important hub for crypto-asset activity in the APAC region. The SFC’s robust and comprehensive regulatory framework is seen by many observers as an example of a regulatory regime that could facilitate the growth of a mature crypto industry locally.
The relatively slow pace of app approvals so far, however, has raised concerns that Hong Kong may prove to be a more challenging environment for crypto firms to operate in than some had imagined. It is therefore a positive sign that almost a dozen VAPTs have been granted permission to continue operating in Hong Kong pending final approval from the SFC.
To learn more about Hong Kong’s regulatory framework for cryptocurrencies, see Elliptic’s June 2023. webinar with SFC Director of Licensing and Head of Fintech Elizabeth Wong.
New York regulator issues guidelines on cryptocurrency user complaints
The New York Department of Financial Services (NYDFS) has issued new guidelines for crypto firms to ensure high standards of consumer protection are applied across the industry.
On May 30, the NYDFS – which oversees crypto exchanges and custodians in New York State under its Bitlicense regime – issued guidance outlining best practices for handling customer service and compliance requests related to crypto trading activities. The guidelines are intended to assist licensed New York crypto firms in implementing policies and procedures that ensure that customer claims and complaints are resolved in a timely manner, and to ensure that regulated crypto firms have appropriate record-keeping and governance arrangements regarding these practices.
The guidelines describe common effective practices for handling customer requests and complaints, including:
- providing users with both a telephone and electronic text mechanism for submitting requests and complaints, in addition to any other methods for submitting requests and complaints that VCE may have;
- providing regular updates and estimated resolution times to the customer, providing a means for the customer to be informed of the status of their request or complaint, and providing an explanation when the outcome of the issue is less than what the customer requested;
- posting FAQs or similar communications without the need to log in to an account;
- follow-up of requests and complaints, with feedback on customer satisfaction;
- reporting on a quarterly table of the number of requests and complaints received, broken down by method and topic of request/complaint. The table must include the average time from receipt to resolution of requests and appeals;
- providing a copy of their customer service and complaints policies and procedures, including provisions that align with the standards described throughout the guide;
- specifying the individual or individuals responsible for customer service and complaints policies and procedures.
Licensed firms must maintain records of their policies and procedures for handling customer inquiries in order to be subject to NYDFS review. These records must include a quarterly analysis and review of customer complaints received by the firm.
US lawmakers seek to address fentanyl trade risks
Two US senators are demanding more information from President Joe Biden’s administration about the role of crypto-assets in the global fentanyl narcotic trade.
On May 29, Senator Elizabeth Warren of Massachusetts – who has been the self-proclaimed leader of the anti-crypto brigade in the US Congress – and Senator Bill Cassidy of Maryland issued a letter regarding America’s fentanyl addiction crisis to the heads of the Office of National Drug Control Policy and Administration for the fight against drugs. In it, the senators expressed concern that the crypto-asset was being used to settle payments as part of the fentanyl supply chain, and specifically to facilitate transactions related to the purchase of fentanyl precursor chemicals from China.
The letter requests that the two offices provide an assessment of the role of cryptocurrencies in the fentanyl trade and explain the next steps the Biden administration plans to take to limit the use of cryptocurrencies in the trade.
To date, the Biden administration has issued several rounds financial sanctions targeting Chinese individuals and entities using crypto to engage in the trade of fentanyl precursor chemicals.
A crypto bill begins to advance through the Turkish parliament
A bill that would provide Turkey with a comprehensive regulatory framework for cryptocurrencies has cleared its first hurdle in the Turkish parliament.
On May 30, the Planning and Budget Committee of the Turkish Parliament approved legislation that will provide the country with a supervisory regime for virtual asset service providers (VASPs) under the auspices of the Capital Markets Board, the local regulatory body.
While the bill still requires full parliamentary approval, its progress through the Planning and Budget Committee suggests it is on the right track – an important step not only towards providing Turkey with a domestic regulatory framework for cryptocurrencies, but also in helping to ensure its removal from gray list of countries maintained by the Financial Action Task Force (FATF) for failing to implement sufficient measures to combat money laundering and terrorist financing.
CryptoUK issues travel policy guidelines
The UK’s leading crypto industry organization has published guidelines designed to help local firms meet the ever-challenging requirements Travel rule.
On June 5, CryptoUK published a Good practice guide to travel rules which sets out advice for the operational implementation of the Travel Rule data exchange requirements that all UK-registered cryptoasset trading firms must comply with from September 2023.
Elliptic’s Senior EMEA Policy Advisor Mark Aruliah co-chaired the CryptoUK Travel Rule Working Group with Catarine Veloso of Notabene. The guide articulates practices that crypto firms can take to address key challenges related to the Travel Rule, including those involving counterparty due diligence and the treatment of hostless wallets.
To access the full guide, see here.
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