Hong Kong and Its New Crypto Move!

Hong Kong and Its New Crypto Move! Hong Kong Monetary Authority (HKMA) has issued an 11-page circular on tokenization and digital asset custody standards for locally authorized organizations. The document urges institutions to conduct comprehensive risk assessments for proper governance and risk management in crypto custody services and allocate the necessary resources. Also, the HKMA requests organizations to develop internal policies to effectively address potential or existing conflicts of interest.

These authorized organizations are also required to segregate customer assets from corporate assets and to develop containment and disaster recovery plans to reduce the risk of loss of customer digital assets due to theft, fraud, negligence, or other unfair actions, as stated in the HKMA’s guidelines.

Other requirements from the actual central bank of Hong Kong include a comprehensive explanation of the risks associated with crypto custody regulations and compliance with anti-money laundering and terrorist financing protocols. These authorized institutions or the related locally established authorized institutions (including subsidiaries already engaged in such activities) must inform the HKMA and confirm compliance with the standards stated in the Appendix within six months from the date of the circular issuance, the “HKMA specified.

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This guide follows Hong Kong’s efforts to reclaim its position as the crypto hub of Asia. Since June 2023, the region has officially started the licensing regime for virtual asset trading platforms and granted permission to licensed exchanges to provide retail trading services. Hong Kong has granted licenses to two platforms, namely HashKey and OSL.