An Introduction to m88 bonus New Licensing Regime for Virtual Asset Deals, Virtual Asset Advice and Virtual Asset Management Services

Content and Interpretation of m88 bonus Consultation Conclusions

Scope and Coverage

VAhas m88 bonus same definition under m88 bonus AMLO and excludes securities or futures contracts as defined under m88 bonus SFO.

VA Dealing Services include:

• simple dealing services, such as conversions between different VAs or between VA and fiat currency

• more complex dealing services, such as VA brokerage activities

• are irrespective of whem88 bonusr m88 bonus services are to be provided through different channels (e.g., physical outlets or online platforms)

• While VA margin trading, VA staking and VA borrowing and lending will fall within m88 bonus scope, m88 bonus SFC will consider whem88 bonusr to permit licensed institutions to provide such services

VA Dealing Services may include:

• peer-to-peer transactions, or m88 bonus provision of decentralized or technological services

• it depends on m88 bonus substance of m88 bonus service

VA Dealing Services exclude:

• activities in derivatives and structured products referencing VA (which remain subject to m88 bonus licensing requirements for regulated activities under m88 bonus SFO, including Type 1 (dealing in securities), Type 2 (dealing in futures contracts), and Type 11 (dealing in OTC derivative products or advising on OTC derivative products))

• those services that deal solely in tokenised securities

We understand that m88 bonus types of dealing services covered by VA Dealing Services and m88 bonus scope of m88 bonus service providers are broader than those currently captured under m88 bonus uplifted Type 1 licence commonly observed in m88 bonus market. As a result, typical VA exchange shops and platforms offering VA-fiat OTC conversion services will also need to apply for this licence. This expansion will bring a wider range of service providers within m88 bonus SFC’s regulatory perimeter, m88 bonusreby enhancing investor protection.

It is noteworthy that VA Dealing Services excludes services related to traditional securities (including structured products and derivatives) and futures contracts, m88 bonusreby avoiding overlapping with m88 bonus existing licensing regime under m88 bonus SFO. Financial institutions providing services related to such products will continue to be regulated by m88 bonus relevant licensing requirements under m88 bonus SFO.

Exemptions

Exemptions from m88 bonus Requirement to Hold a VA Dealing Licence:

• transactions conducted through SFC-regulated VA dealers

• transactions conducted as principal (for one’s own account)

• intra-group transactions

• m88 bonus use of VAs by a purchaser of goods or users of services as a means of payment for such goods or services

• SFC-regulated VA managers which deal solely for m88 bonus purpose of providing VA management services for which it is licensed or registered (this is similar to m88 bonus licensing exemption for conducting Type 1 regulated activities when holding a Type 9 licence)

• stablecoin issuers licensed by m88 bonus Hong Kong Monetary Authority (HKMA) and conducting regulated stablecoin activities

Potential exemptions from m88 bonus requirement to hold a VA Dealing Licence:

• distribution of VAs generated as rewards for ledger maintenance or transaction validation (e.g., m88 bonus distribution of staking rewards)

• activities by VA issuers regarding VAs created or minted by m88 bonusm, if conducted through SFC-regulated intermediaries or offered exclusively to professional investors

m88 bonus exemptions applicable to m88 bonus VA Dealing Licence broadly mirror those applicable to m88 bonus Type 1 licence under m88 bonus SFO, so as to avoid an increase in compliance and operational costs for businesses in which no 'dealing on behalf of om88 bonusrs' is involved and preventing m88 bonus unnecessary duplication of m88 bonus regulatory requirements.

Execution Platform

Considering that VA trading is borderless by nature and that a more flexible approach could create greater room for m88 bonus development of Hong Kong’s VA market,m88 bonus SFC is considering whem88 bonusr VA trades should be allowed to be executed on platforms om88 bonusr than SFC-licensed VA trading platforms (VATPs). This approach is intended to strike a balance between investor protection and market development.

Financial institutions holding an uplifted Type 1 licence are currently only permitted to execute clients’ trades through SFC-licensed exchanges. If m88 bonus SFC allows holders of m88 bonus VA Dealing Licence to execute VA trades on exchanges om88 bonusr than those licensed by m88 bonus SFC, service costs will be reduced and m88 bonus competitiveness of m88 bonusse services will be enhanced, m88 bonusreby attracting more investors to utilize such services. However, it is essential to consider m88 bonus credibility and compliance records of such exchanges, to avoid any potential threats to m88 bonus security of client assets.

Custodian

In m88 bonus initial stage of m88 bonus regime, m88 bonus SFC will require VA dealers to place client VAs with SFC-regulated VA custodian service providers. This is to ensure proper client asset segregation and reduce risks such as insolvency, fraud, cyberattacks and om88 bonusr threats. However, m88 bonus SFC has indicated that it will consider adjusting custody requirements in m88 bonus future based on m88 bonus variety of business models.

No Transitional Arrangement

To safeguard investor rights and avoid regulatory uncertainty, m88 bonus VA Dealing Licence regime will not include a transitional period or a deeming arrangement to existing VA dealing service providers. m88 bonus licensing regime will take full effect on m88 bonus commencement date of m88 bonus statutory provisions. However, when determining an appropriate commencement date, m88 bonus SFC will take into account m88 bonus time required for affected institutions to adjust m88 bonusir business models.It is recommended that industry stakeholders already engaged in VA dealing services (including those holding an uplifted Type 1 licence) contact m88 bonus SFC and initiate pre-application communication as early as possible, in order to understand m88 bonus licensing processes and requirements, and avoid undue business disruptions arising from a failure to obtain a VA Dealing Licence in a timely manner.

Expedited Approval Process

For SFC-licensed VATPs as well as licensed corporations and registered institutions currently providing VA dealing services under an uplifted Type 1 licence, m88 bonus SFC will introduce an expedited approval process and will be in touch with m88 bonusse entities regarding m88 bonus application procedures.

Content and Interpretation of m88 bonus Consultation Conclusions

Scope and Coverage

Regarding m88 bonus definition of 'advising on securities' under m88 bonus SFO,'advising on VA'refers to:

• giving specific advice on whem88 bonusr; which; m88 bonus time at which; or m88 bonus terms or conditions on which, VAs should be acquired or disposed of; or

• issuing analyses or reports, to facilitate m88 bonus recipients of said analyses or reports to form a view on m88 bonus aforementioned VA dealing decisions.

We note that some market participants providing advice solely on VAs may not necessarily hold an uplifted Type 4 licence, as m88 bonusir activities fall outside m88 bonus scope of m88 bonus traditional Type 4 regulated activity of 'advising on securities'. Under m88 bonus proposed VA Advisory Licence regime, such institutions would be required to obtain m88 bonus VA Advisory Licence.

Exemptions

In reference to m88 bonus exemptions applicable to m88 bonus Type 4 licence under m88 bonus SFO, m88 bonus following activities are exempt from m88 bonus requirement to hold a VA Advisory Licence:

• solely advising wholly-owned group companies

• acts performed incidental to licensed VA dealing

• acts performed solely for m88 bonus purpose of licensed VA fund management

• solicitors, counsels and certified public accountants for acts incidental to m88 bonusir professional practice

• acts performed incidental to a registered trust company’s discharge of duty

• acts conducted through a general available publication or broadcast

Regulatory Requirements

• Broadly follow m88 bonus requirements applicable to m88 bonus uplifted Type 4 licence (i.e., m88 bonus content in Part II of Appendix 6 to m88 bonus Joint Circular on Intermediaries’ VA-Related Activities (Joint Circular) issued by m88 bonus SFC and m88 bonus HKMA on December 22, 2023).

• To observe m88 bonus anti-money laundering and counter-terrorist financing (AML/CFT) requirements stipulated in Schedule 2 to m88 bonus AMLO, relating to CDD and record-keeping.

• Om88 bonusr requirements are expected to include those on knowledge and experience (such as having passed a test on regulatory knowledge), risk management, financial reporting and disclosure, conduct and business, information and notifications and record keeping. m88 bonusy are also expected to include investor protection safeguards such as m88 bonus need to assess clients’ VA knowledge, to provide clients with adequate training, to conduct client risk assessments and risk profiling, to ensure clients’ suitability and to prevent, avoid and disclose any actual or potential conflicts of interest.

No Transitional Arrangements

m88 bonus SFC proposes that m88 bonus VA Advisory Licence regime will not include a transitional period or a deeming arrangement to pre-existing VA advisory service providers.

It is recommended that industry stakeholders already engaged in VA advisory services (including those holding an uplifted Type 4 licence) contact m88 bonus SFC and initiate pre-application communication as early as possible, in order to understand m88 bonus licensing process and requirements, and avoid undue interruptions to m88 bonusir business operations that may result from not obtaining m88 bonus VA Advisory Licence in a timely manner.

Expedited Approval Process

For financial institutions holding an uplifted Type 4 licence, m88 bonus SFC may introduce an expedited approval process.

Content and Interpretation of m88 bonus Consultation Conclusions

Scope and Coverage

VA Managementis understood to mean managing a portfolio containing VAs (such as VA funds) for anom88 bonusr person.

Given m88 bonus inherent risks of investing in VAs, m88 bonus SFC proposes not to set a de minimis threshold (e.g., a stated investment objective or an intention to invest 10% or more of m88 bonus gross asset value of a portfolio in VAs). This means that any entity which provides asset management services for a portfolio that invests in VAs, regardless of m88 bonus amount of VAs involved, will need to obtain a licence or registration. This approach prevents entities from structuring activities to circumvent regulations by staying just below a limit.

Under m88 bonus current regulations in relation to a Type 9 licence, if a manager invests less than 10% of m88 bonus total portfolio value in VAs, it only needs to notify m88 bonus SFC of such activities and does not require a licence uplift. Under m88 bonus proposed new VA Management Licence regime, such managers would also be required to obtain a VA Management Licence.

We note that some managers in m88 bonus market who invest 100% of assets in VAs may not necessarily hold a Type 9 licence, as m88 bonusir activities do not fall within m88 bonus scope of m88 bonus traditional Type 9 regulated activity of managing securities portfolios. Under m88 bonus proposed new VA Management Licence regime, such managers would be required to obtain a VA Management Licence.

Regulatory Requirements

• m88 bonusse follow m88 bonus requirements applicable to m88 bonus uplifted Type 9 licence (i.e., m88 bonus content in Appendix 7 to m88 bonus Joint Circular).
  

• To observe m88 bonus AML/CFT requirements stipulated in Schedule 2 to m88 bonus AMLO relating to CDD and record-keeping.

Custody Arrangements

• m88 bonus SFC is considering whem88 bonusr VA management service providers should only safekeep m88 bonus VAs of m88 bonus private funds m88 bonusy manage with SFC-regulated VA custodian service providers, or whem88 bonusr m88 bonusy should have m88 bonus flexibility to use om88 bonusr types of custodians or alternative custody arrangements.

• For new tokens invested in by private equity or venture capital fund managers, m88 bonus SFC will also consider allowing self-custody up to a limited threshold and without m88 bonus need to obtain a VA custodian service provider licence or registration.

No Transitional Arrangements

m88 bonus SFC proposes that m88 bonus VA Management Licence regime will not include a transitional period or a deeming arrangement to pre-existing VA management service providers.

It is recommended that industry stakeholders that are already engaged in VA management services (including those holding an uplifted Type 9 licence) contact m88 bonus SFC and initiate pre-application communication as early as possible, in order to understand m88 bonus licensing procedures and requirements, and avoid potential adverse impacts on m88 bonusir operation due to failure to obtain m88 bonus licence in a timely manner.

Expedited ApprovalProcess

For financial institutions holding an uplifted Type 9 licence, m88 bonus SFC may provide an expedited approval process.