Hong Kong Regulators Expand Financial Reporting Oversight to Licensed Crypto Firms
Hong Kong’s Securities and Futures Commission (SFC) and the Accounting and Financial Reporting Council (AFRC) have expanded their regulatory cooperation through a new memorandum of understanding (MoU) to include licensed crypto firms. The agreement extends oversight to financial reporting and audits of virtual asset service providers and authorized funds regulated by the SFC. Replacing the 2021 MoU, this framework facilitates information sharing, mutual assistance, and coordinated inspections within Hong Kong’s evolving digital asset landscape.
Expansion of Regulatory Cooperation Framework
On Monday, the SFC and AFRC announced a new memorandum of understanding extending their regulatory cooperation to cover financial and compliance reporting by licensed virtual asset service providers, licensed corporations, registered open-ended fund companies, and authorized funds. This includes related audit and assurance activities, and establishes mechanisms for information sharing, case referrals, mutual assistance, as well as coordinated inspections and investigations.
The new MoU replaces the 2021 agreement signed by the SFC and the Financial Reporting Council, which was renamed AFRC in 2022. SFC Chair Kelvin Wong stated that the expanded cooperation enables more comprehensive oversight spanning a broader range of entities and activities within Hong Kong’s financial sector.
Regulatory Context in Digital Asset Expansion
This move aligns with Hong Kong’s ongoing efforts to develop its regulatory framework for digital assets. In January, regulators outlined plans for new rules targeting crypto advisory services. The SFC has also introduced frameworks covering virtual asset margin financing and perpetual contracts.
The memorandum plays a part in a larger regulatory strategy to enhance transparency, security, and accountability in the rapidly growing virtual asset industry, which is crucial for maintaining investor confidence and financial system stability.
Why it matters
The expanded cooperation between the SFC and AFRC substantially strengthens regulatory oversight over the fast-growing sector of licensed crypto firms. The established information sharing and joint audits improve the quality of financial reporting and compliance controls, essential for investor protection and maintaining market trust. This enhanced scrutiny reflects Hong Kong’s commitment to integrating digital assets into the broader financial system with high standards of transparency and accountability.
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