In the Financial Secretary’s 2020 – 2021 budget speech, the Hong Kong government announced that it will consider extending the anti-money laundering/counter-terrorist financing requirements to cover cryptocurrency service providers. Cryptocurrencies are currently classified as virtual assets in the city and are regulated by the Securities and Futures Commission.
By including cryptocurrencies under AML regulations, the government would attempt to curb the use of platforms such as bitcoin in money laundering. This is an issue that has arisen for many global regulators, as by their nature crypto assets are often designed to obscure the identity of the user, as well as to hide the purpose of the transaction, making them extremely attractive to those with nefarious purposes. However, they also hold many attractive benefits to users including transactional security, low transfer costs and decentralisation, meaning that many regulators are facing an environment where they are already widely used. By bringing service providers into the existing AML regime Hong Kong is hoping to address some of these ongoing issues.