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Hong Kong, known for its proactive stance in financial regulation, has taken another important step in shaping the crypto landscape.
Hong Kong Announces Crypto Custody Framework
The Hong Kong Monetary Authority (HKMA) has published an 11-page circular outlining interim standards for tokenization and custody of digital assets by locally authorized institutions.
The published circular emphasizes the importance of sound risk assessment and appropriate management in the field of crypto custody services.
It calls on institutions to allocate adequate resources to risk management while establishing internal policies to reduce potential conflicts of interest.
One of the key directives outlined in the guide is the separation of customer assets from company assets.
In addition, authorities are required to develop emergency and disaster recovery plans to mitigate risks such as theft, fraud or negligence that could lead to loss of or delayed access to customer digital assets.
The HKMA also emphasizes the importance of full disclosure regarding the risks associated with crypto custody arrangements. Compliance with anti-money laundering and counter-terrorist financing guidelines is recognized as essential.
To ensure compliance, the HKMA has set a timeline for institutions to confirm that they comply with the stated standards.
Institutions engaged in crypto custody activities, including subsidiaries of locally established competent institutions, are required to notify the HKMA within six months of the publication of the circular.
*This is not investment advice.