- Decentralized exchanges dealing with virtual assets need licenses as well.
- DeFi must be subject to the same regulatory standards as conventional financial activity.
Hong Kong is a global leader in the areas of crypto, web 3.0, and decentralized finance. The special administrative region’s goals and policies are consistent with its vision of becoming a technological center.
ZA Bank, a regional institution, recently announced that it will support fiat and cryptocurrency transactions and provide account services to the city’s burgeoning digital asset market. As a result, Hong Kong’s biggest online bank will now serve as a “settlement bank” for cryptocurrency trading platforms.
Moreover, in a similar vein, Hong Kong hopes to improve its regulatory framework. At a recent speech at the Web3 Festival in Hong Kong, Keith Choy, Interim Head of Intermediaries at the Hong Kong Securities and Futures Commission (SFC), said that DeFi projects should be subject to oversight.
Subject to Regulatory Standards Similar to Conventional Finance
DeFi must be subject to the same regulatory standards as conventional financial activity so long as it comes within the purview of the Securities and Futures Act (SFO). In addition, he allegedly said that decentralized exchanges dealing with virtual assets need licenses as well.
According to Choy, a lack of data and uncontrolled enterprises and activities provide problems for regulators in terms of financial stability and insufficient transparency. He then spoke on the problems with market integrity that arise from front-running and price oracle manipulation.
A report from the French central bank published only recently indicated DeFi projects may be required to include or demonstrate compliance with governance and security regulations and standards. Moreover, the United States Department of the Treasury has also made it clear that DeFi services do not adhere to AML/CFT regulations.
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