HKMA’s Expectations in Light of BCBS’ Statement on Crypto-Assets

The Banking Policy Department of the Hong Kong Monetary Authority (HKMA) published a circular (BCBS Statement on Crypto-Assets) on March 18, 2019 in light of a newsletter by the Basel Committee on Banking Supervision (BCBS) on March 13, 2019, stating the BCBS’ prudential expectations regarding banks’ exposures to crypto-assets and related services. The HKMA expects banks to take note of the BCBS’ statement and its prudential expectations, and to discuss with the HKMA when planning to engage in activities relating to crypto-assets and demonstrate that they have put in place appropriate systems and controls to identify and manage any risks associated with such activities.

While the BCBS acknowledges that the crypto-asset market remains small relative to the global financial system, they anticipate that the continued growth of crypto-asset trading platforms and new financial products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks. In view of the immature and high-risk nature of this asset class, the BCBS expects that banks acquiring crypto-asset exposures or providing related services to adopt the following measures at a minimum:

1) Due Diligence

2) Governance and risk management

3) Disclosure

4) Supervisory Dialogue

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Mayer Brown’s partner Sara S. M. Or and registered foreign lawyer Shirley T.W. Chan in the Hong Kong office highlight areas of interest in this Legal Update.

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