What Do Recent Regulatory Proposals In Hong Kong Mean For Offshore Virtual Assets Exchanges?

BACKGROUND

2021 has seen significant volatility in the prices of major cryptocurrencies. With such volatility, fortunes have been made and lost, with losses often borne by inexperienced retail clients. It's therefore unsurprising that we have seen increased focus from international regulators in the cryptocurrency space.  

The Cayman Islands was ahead of other jurisdictions in developing a bespoke regulatory framework for the provision of services relating to virtual assets. This was implemented by way of the Virtual Asset (Service Providers) Act (the “VASP Act”) of the Cayman Islands, which became effective from 31 October 2020 (subject to phased implementation).   

In Hong Kong, the Financial Services and the Treasury Bureau published its conclusions paper (the “FSTB Proposals”) on 21 May 2021 following a three month public consultation on a licensing regime for virtual asset services providers.