The Hong Kong Monetary Authority (HKMA) published an 11-page circular on Tuesday that outlined the rules for digital asset custody and tokenization for institutions that are authorized in the country.
Crypto exchanges now have a clear path to operating under regulation thanks to the latest guidelines from the Hong Kong Monetary Authority (HKMA), which enhances the licensing system that was implemented last year.
Within the eleven-page paper titled “Expected Standards,” the HKMA highlights how crucial it is for approved institutions to carry out comprehensive risk assessments and put in place suitable measures to handle risks connected to their bitcoin custody services.
The industry is also required by the central bank to commit enough resources, including as knowledgeable staff and experience, to custodial operations.
In order to maintain business operations across any potential conflicts of interest, it is necessary to set up strong disaster-recovery procedures.
“The risk of loss of client digital assets due to theft, fraud, negligence or other acts of misappropriation, as well as delayed access or inaccessibility of client digital assets,” is something that the HKMA expects institutions who provide custody services to lower.
They also need to submit to independent system audits, store private keys securely within Hong Kong, maintain a sizable amount of client digital assets in cold storage, and be ready to give documentation to the HKMA upon request.
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