In what appears to be a further crackdown on freedoms in Hong Kong, the Securities and Futures Commission (SFC) said Bitcoin exchanges operating in the territory should be licensed.
The SFC proposal seeks to enforce the ruling by imposing heavy fines and harsh prison terms on non-compliant people. The Hong Kong government has also confirmed that it intends to prevent retail investors from trading cryptocurrency.
“A HK $ 5 million (USD 644.054) fine and up to seven years' imprisonment as a deterrent against non-compliant and unauthorized activities. Those who violate the AML and the financing needs of counter-terrorism will face a fine of HK $ 1 million and up to two years in prison ”.
However, regulatory restrictions will always be met by alternative ways and means. Harshly blocking the cryptocurrency will only result in an own goal for the Hong Kong authorities.
Hong Kong authorities see Bitcoin as a criminal conduit
Hong Kong authorities are stepping up their anti-Bitcoin campaign as the city's Financial Services and Treasury Bureau (FSTB) releases its anti-money laundering report.
In an effort to combat money laundering and terrorist financing, the FSTB wishes to come up with legislative proposals to meet the standards of the Financial Action Task Force (FATF).
In March, the FATF released revised guidelines on how member states should approach cryptocurrencies. Research director at the Coin Center, Peter Van Valkenburgh, called the recommendations an undemocratic process that will result in greater mass surveillance without a mandate.
Its main focus is on a change in the definition of a Virtual Asset Service Provider (VASP). This would require multiple entities to register with local regulatory bodies and conduct anti-money laundering surveillance on their behalf.
Looking at both FSTB and SFC stocks, we are seeing a top-down suppression of the Bitcoin and cryptocurrency sector in Hong Kong.
Lennix Lai, director of the cryptocurrency exchange OKEX, which is based in the Seychelles but operates in Hong Kong, said:
"The new licensing regime will become more costly for those who have offered trading services that fall within the definition of regulated but unlicensed businesses to the Hong Kong retail public."
Lai said his company is still mulling over the proposals. He added that smaller exchanges would rather leave Hong Kong than face higher compliance costs.
No government can prevent its citizens from trading cryptocurrency
China does not recognize cryptocurrency as legal tender and has banned the practice of ICOs. The Chinese government also places severe restrictions on cryptocurrency exchanges that prohibit the exchange of yuan for cryptocurrencies.
Despite this, it is well known that Chinese citizens wanting buy Bitcoins and trading cryptocurrency still do it via OTC banks. This involves obtaining stablecoins, mainly Tether, and trading cryptocurrencies in cryptocurrencies. In any case, owning Bitcoin in China is not prohibited.