SFO/AMLO Licenses: The Hong Kong Securities and Futures Commission (SFC) has established strict and transparent compliance regulations for Virtual Asset Trading Platforms (VATPs). The licenses under the Securities and Futures Ordinance (Cap. 571) (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) are highly applicable to VATPs. Currently, two virtual asset trading platforms have been licensed, and another 16 are in the application process.
Disclosure Requirements: Regarding record-keeping and compliance documentation, the three main regulatory disclosure requirements for the SFO/AMLO licenses include: monthly reconciliation of client assets, submission of monthly and semi-annual reports to the SFC, and conducting an annual audit.
Asset Protection: The protection of client assets is key. These assets should be held in trust accounts. Platforms should have compensation arrangements in place to cover 50% of potential losses from cold storage and 100% from hot storage and other types of storage. Transactions must be authorized by at least two parties, and a minimum of 98% of client assets should be stored in cold storage.