Crypto Firms Face Compliance Checks in Hong Kong

Crypto firms face compliance checks in Hong Kong as eleven crypto asset companies and exchanges withdraw license applications before the deadline.

After the June 1 licensing deadline, the Hong Kong Securities and Futures Commission (SFC) will “conduct on-site inspections” of local virtual asset trading platforms (VATPs) that are still undergoing regulatory application processing.

On May 28, the SFC reminded cryptocurrency firms of their obligation to obtain licenses before June. All local cryptocurrency trading platforms must be licensed or “deemed to be licensed” by the SFC by the specified date.

Applicants deemed to be licensed will be subject to a short-term framework specifically intended for cryptocurrency firms that were active in the region before the implementation of the licensing regime.

After June 1, operating an unlicensed VATP in Hong Kong would be illegal, and the SFC would pursue companies in person.

“While the deemed-to-be-licensed VATP applicants pursue their applications in the coming months, the SFC will conduct on-site inspections to ensure compliance with its regulatory requirements,” the SFC stated.

It further stated that it would “place special emphasis” on how the companies protect client assets and execute Know Your Customer (KYC) procedures.

ASIC advised investors to trade cryptocurrencies exclusively on SFC-licensed platforms.

It warned license-seeking businesses not to “actively market services or onboard new retail clients until formally licensed” and to restrict access to their services by mainland Chinese residents.

The number of cryptocurrency exchanges vying for operational licenses in Hong Kong has decreased gradually since the beginning of this month.

Eleven cryptocurrency companies and exchanges, including the local branches of OKX and Huobi, opted to withdraw their applications before the deadline. This leaves 18 applications in the approval phase.

On May 23, the cryptocurrency exchange Gate.HK ceased all marketing and user acquisition-related operations, blocked deposits by existing users, and initiated the delisting of tokens.

It intends to relaunch services following the platform’s reconstruction to meet Hong Kong’s regulatory requirements.

The SFC reports that only two companies, Hash Blockchain Limited and OSL Digital Securities Limited, have been granted licenses to operate in Hong Kong.