SFC: New regulatory regime for licensed crypto exchanges akin to securities brokers in response to FTX incident

Radio Television Hong Kong (RTHK) interviewed the Hong Kong Securities and Futures Commission on December 12 about how they are addressing investor protection issues highlighted by the FTX incident. The Securities and Futures Commission responded that they have already passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill and are currently drafting regulatory requirements for licensed exchanges under the new regime, with public information made available.

Hong Kong: Strict Regulation Needed Instead of Anti-Money Laundering or Payment Perspectives

The Securities and Futures Commission of Hong Kong stated that while many jurisdictions regulate cryptocurrency service providers with a lenient approach from anti-money laundering or payment perspectives, Hong Kong treats exchanges similarly to securities brokers and thus adopts a comprehensive regulatory approach. Exchanges are required to segregate user assets with trusts, submit audit reports and financial information regularly, and avoid conflicts of interest.

Hong Kong: Caution Against Unregulated Exchanges

The Securities and Futures Commission of Hong Kong has been consistently reminding investors of the risks associated with unregulated exchanges and their capacity for absorbing losses.

Prior to September last year, the exchange FTX relocated its office from Hong Kong to the Bahamas due to new regulatory laws in Hong Kong and China's cryptocurrency ban.

Taiwan's FSC: Unable to Regulate Domestic and Overseas Entities with AML Measures

Huang Tien-Mu, Chairman of Taiwan's Financial Supervisory Commission (FSC), recently mentioned that many FTX users are protected in countries where FTX has established subsidiaries. Simply connecting to overseas platforms via mobile does not fall within Taiwan's regulatory scope. The FSC has also issued announcements stating that FTX exchange operates overseas and is not an institution approved by the FSC, with related products offered abroad, advising investors to evaluate risks themselves.

Currently, the FSC has only submitted anti-money laundering and anti-terrorism financing measures to virtual currency operators: Anti-Money Laundering and Anti-Terrorism Financing Regulations. Operators have submitted compliance statements: Declaration of Compliance with Laws by Operators, and there is no dedicated licensing system.