On January 16, 2025, the Securities and Futures Commission ("SFC") announced an enhanced licensing process and revamped external assessments for new virtual asset trading platforms ("VATPs"). Applicants must submit their license applications with required documentation and engage an external assessor. The external assessment focuses on ensuring that the VATP's policies, procedures, systems, and controls are suitably designed and implemented. The process includes a tripartite agreement with the SFC and EA, and the EA's findings will be supervised and clarified by the SFC.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
Summary of Circular to Virtual Asset Trading Platforms (VATPs) on Licensing Process and Revamped Second-phase Assessment
The latest SFC circular outlines an updated licensing process for virtual asset trading platforms (“VATPs”) including the new Second-phase Assessment procedures
Regulation of - Non-Fungible Tokens in Hong Kong
NFT regulation circular reminds investors of NFT risks and the types of NFTs that may trigger licensing or authorization requirements in Hong Kong.
SPOTLIGHT ON
FAMILY OFFICES
On January 16, 2025, the Securities and Futures Commission ("SFC") introduced an enhanced licensing process and updated external assessments for new virtual asset trading platforms ("VATPs"). This change was detailed in a Circular issued on 18 December 2024, superseding previous guidelines from June 2023.
The SFC’s approach emphasizes direct guidance and effective regulatory oversight. VATPs are required to engage an external assessor ("EA") to perform an external assessment post-system deployment. The SFC will be involved in this engagement to ensure the VATP’s policies, procedures, systems, and controls ("P&P") are adequately designed and implemented.
VATP applicants must submit a licensing application bundle via WINGS, including written policies and procedures, EA suitability documentation, and the EA's capability statement. The SFC will review the applicant’s business structure, personnel competence, and EA capability. The SFC reserves the right to reject the application if incomplete or unresolved.
Upon license acceptance, the VATP applicant deploys relevant systems and controls, such as market surveillance, anti-money laundering tools, and custody solutions. A tripartite agreement is arranged among the SFC, VATP, and EA for the external assessment. The EA will have unrestricted access to personnel and information, and findings will be resolved during the assessment.
The external assessment concentrates on ensuring VATPs' P&P are suitably designed and implemented. A certified public accountant will perform a direct assurance engagement, and the EA will form an opinion on compliance with Guidelines for Virtual Asset Trading Platform Operators and Anti-Money Laundering guidelines. The assessment's terms and scope are jointly agreed upon by the SFC, VATP, and EA. For further details, applicants should contact the Fintech unit of the SFC.
Notably, VATPs no longer need to conduct first-phase and second-phase assessments. A single external assessment is now mandatory throughout the licensing process. The SFC and EA must agree on the external assessment terms and scope, with the SFC contributing $1 and the VATP covering the remainder of the fees. Additional details are provided in a supplementary document appended to this Circular.
View the full article:Source