The standards for Virtual Asset Service Providers (VASPs) in Hong Kong are set “incredibly high” as the Securities and Futures Commission (SFC) is wanting the crypto industry to match the same compliance standards as traditional financial firms.
Speaking to Cointelegraph at the Hong Kong WOW Summit, Lucy Gazmararian, the founder of crypto venture firm Token Bay Capital and an SFC Fintech Advisory Group member explained that while “the bar is set high” they’re in place for a “good reason.”
“The standards are incredibly high because [the SFCs] approach is to ask VASPs to apply the same standards that existing financial institutions like huge banks and huge asset managers have to comply with.”
The SFC published a consultation paper on Feb. 20 that considered whether licensed VASPs should serve retail investors and what standard of investor protection measures should be imposed.
Anti-money laundering (AML) and Know Your Customer (KYC) policies were also discussed.
Gazmararian said these high standards may pose challenges for the crypto industry in Hong Kong over the short term.
“The issue is that crypto businesses are often in the startup phase,” she explained. “Many have funding but not huge amounts, not hundreds of millions.”
“To comply with the framework does incur significant costs,” she added, citing the need for local VASPs to have insurance, independent assessment reports and store crypto in cold storage.
“A criticism has been if you’re a start-up crypto company, how do you even get started? Is that going to stifle the industry?”
With a solid regulatory framework in place, Gazmararian believes more well-capitalized financial firms will be willing to help promising startups get off the ground.
“I think companies that do get the license are going to be upholding the most stringent standards so the bar is set high but I think for good reason,” Gazmararian said.
“Cryptocurrency platforms are part of the entire Web 3.0 ecosystem, and we strongly support the development of the entire Internet ecosystem.
— ivanferrari.eth.zk (@ferrarivarese) April 3, 2023
The SFC encouraged individuals, corporations and crypto firms to review the 361-page consultation paper and provide feedback.
The securities regulator wants these entities to share their views and point to things that may have been missed, because they are “absolutely focused” on getting everything right, Gazmararian explained.
Submissions for feedback on the consultation paper closed on March 31.
Related: US crackdown will push crypto ‘center of gravity’ to Hong Kong: Kaiko CEO
In recent months, Hong Kong has made considerable ground in establishing itself as the world’s next crypto hub.
More than 80 digital asset firms have expressed interest in establishing a presence in Hong Kong over the last few months according to a March 20 statement by the Secretary for Financial Services and the Treasury, Christian Hui.
Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips
