Hong Kong is gearing up to usher in a new regime for virtual asset regulation. The Securities and Futures Commission (SFC) released the conclusions of its week-long consultation on regulatory guidance for crypto platforms on May 23.
Crypto exchanges in Hong Kong will need to apply for licenses under the Securities and Futures Ordinance (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The SFC will publish the forms on May 25 and begin accepting applications on June 1, when the guidelines go into effect. As of now, Hong Kong does not have a licensed crypto platform for retail investors.
The regulations set different requirements for crypto platforms. According to the guidelines, crypto platforms must employ at least two “responsible officers” (RO) for each type of license it holds. So a crypto platform licensed under SFO and AMLO would need to hire four ROs.
Responsible Officers are part of top management and must be licensed by the SFC and approved as an RO of an exchange. ROs also require extensive experience to become licensed.
Since crypto is a relatively new field, not many executives have crypto and blockchain expertise. There are about 18,000 licensed ROs in Hong Kong, but only 95 have the Type 7 license to provide the automated trading services that crypto exchanges are looking for.
There is a distinct lack of ROs, which has become a concern for crypto exchanges competing for new licenses. In fact, Lily King, chief operating officer of Cobo, a digital asset custodian applying for a Hong Kong license, told Bloomberg that ROs have become the “toughest position to fill in Hong Kong.” The report noted that it can take up to five months to fill an RO position.
In view of the talent crisis, the SFC has revised the requirements so that dual-licensed crypto exchanges are only required to employ two ROs instead of the previously mandated four. The SFC noted:
“As there may be a talent shortage with both virtual assets and traditional securities experience, we are willing to take a pragmatic approach…”
A lucrative position in Hong Kong
To become an RO, a person must have years of management experience along with relevant experience in the field or product they wish to be licensed for. with all rules and legal requirements. And if their companies fail to comply, ROs face civil and criminal penalties.
With the shortage of ROs, crypto exchanges are trying to work with ROs in traditional finance. But such individuals are generally reluctant to change their careers to crypto, which is considered riskier. That’s why they need more incentive to switch sides, King told Bloomberg.
With the ongoing shortage, RO has become a lucrative position in Hong Kong. The limited number of ROs with blockchain and crypto experience are paid up to 20% more compared to those in traditional finance, according to the Bloomberg report. In fact, the highest RO salaries in Hong Kong have surpassed $19,000 per month, according to the report.