Hong Kong to Develop Cryptocurrency OTC Derivatives Rules Based on European Standards
Date: 2024-09-27 Author: Oliver Abernathy Categories: IN WORLD
On September 26, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) presented a plan that would align the reporting requirements for OTC derivatives with ESMA standards. The decision follows a consultation held in March 2024.
Under the proposal, the mandatory use of digital token identifiers for derivatives reporting would begin on September 29, 2025. Hong Kong financial market participants had previously recommended the introduction of DTI to clearly identify crypto assets underlying OTC derivatives.
Difficulty in classifying crypto assets
Many Hong Kong participants noted the difficulty of classifying crypto derivatives into one of the five traditional asset categories of interest rates, currencies, loans, commodities and equities. In this regard, it was decided to develop specific reporting requirements for crypto assets using DTI.
The HKMA and the SFC also noted that the European Securities Authority implemented the DTI in October 2023, making it a key tool for crypto service providers in Europe.
Transition period and international cooperation
To facilitate the transition to the new standards, market participants will be allowed to temporarily continue to use Unique Transaction Identifiers (USIs) and Trade Identifiers (TIDs) until the formal implementation of DTI.
It is also reported that there are plans to collaborate with financial regulators from Singapore, Australia and Japan to coordinate the implementation of UTIs (Universal Transaction Identifiers) in the Asia-Pacific region.
Expanding OTC Regulation
On September 12, the South China Morning Post reported that Hong Kong Customs and the Securities Exchange Commission are discussing the creation of a new license for OTC cryptocurrency services. Previously, such services were regulated only by Customs. Now, the SFC is actively exploring the possibility of introducing new rules for the storage of crypto assets and consulting with industry representatives.
The new rules will help create a transparent and reliable regulatory framework for crypto derivatives, strengthening Hong Kong's position as a leader in this area.
