Hong Kong’s securities regulator is considering regulating decentralized finance (DeFi) projects by imposing licensing requirements.
According to Zhonghui, automated trading services like decentralized exchanges fall under the authority of regulators. Therefore, DEXs that list virtual assets must also apply for a license.
Zhonghui made this statement at the Web3 Festival in Hong Kong.
Zhongui points out that most DeFi projects are not decentralized. He added that financial regulators must look beyond the description of these projects to their substantive context.
Hong Kong has recently ramped up its efforts to become Asia’s cryptocurrency hub. The authorities have recently made several pro-cryptocurrency moves that have attracted more businesses to the region.
In addition, Hong Kong has a new legal framework for licensing crypto trading platforms, which is expected to come into force by June.
Other Countries Planning DeFi Regulations
Meanwhile, US and French regulators have just released reports highlighting the need to regulate DeFi.
The Banque de France recommended to force DeFi protocols to incorporate smart contract security and authentication.
“Players who effectively manage sensitive services should be consolidated and may be subject to oversight,” the report said.
The U.S. Treasury Department also recommended that DeFi services comply with anti-money laundering and terrorist financing regulations.
“Current DeFi services often do not implement AML/CFT controls or other processes to identify customers, allowing revenue tiering to be instantaneous and pseudonymous,” the report states. said.
With several jurisdictions now considering regulating the DeFi sector, there are concerns about what that might mean for the industry.
The post Hong Kong securities regulator said CryptoSlate was the first to appear in DeFi regulation.
