Strict SFC licensing requirements led major exchanges like OKX, Huobi HK to withdraw applications. Only 17 platforms remain, raising questions about Hong Kong’s crypto future.
In a recently published article, Wu emphasized apprehensions regarding the licensing prerequisites enforced by the Hong Kong Securities and Futures Commission (SFC). These prerequisites have prompted several prominent exchanges to retract their license applications.
Operating in Hong Kong, virtual asset trading platforms must obtain a license from regulatory authorities by the conclusion of the transition period on June 1, 2024, per the licensing system scheduled to go into effect on June 1, 2023.
Noncompliance with the license requirement would lead to the cessation of their commercial activities.
Major Exchanges Withdraw Applications from Hong Kong
Wu focused on the withdrawal sequence that has transpired in the past few months.
HKVAEX, presumed to have ties to Binance, retracted its license application on March 28, 2024.
IBTCEX, QuanXLab, and Huobi HK initiated the process on May 14, and Gate.HK and OKX HK did so on May 24 and 31, respectively, before Bybit (Spark Fintech Limited) did so on May 31.
As a result of these withdrawals, the application list now comprises a mere seventeen virtual asset trading platforms; eleven companies have voluntarily withdrawn or returned their license applications.
Wu ascribed the withdrawals to the Hong Kong SFC’s stipulation that petitioners for licenses to operate virtual asset trading platforms must guarantee the absence of mainland Chinese users across all regions.
The mandate presents a formidable obstacle for conventional offshore exchanges, thereby impeding their ability to adhere to it.
OKX endeavored to establish an industry alliance to oppose the requirement but was ultimately unsuccessful.
Industry insiders have stated that some entities’ withdrawn applications may reconsider reapplying if they update their legal frameworks or entities.
Nevertheless, reapplying under a brand resembling an offshore exchange might be impossible.
At present, eleven platforms maintain their status as licensed applicants, namely HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixincom, xWhale, YAX, Bullish, Cryptocom, WhaleFin, and Matrixport HK.
At this time, only OSL and HashKey have been granted official licenses.
SFC to Conduct On-Site Inspections of Crypto Platforms
Following the June 1 licensing deadline, the Hong Kong SFC has announced that it will undertake on-site inspections of local virtual asset trading platforms (VATPs) that still need to finalize their regulatory applications.
The SFC’s action reminds cryptocurrency companies that they must acquire licenses before the deadline.
Beginning June 1, the SFC must license or “deem to be licensed” all local cryptocurrency trading platforms in Hong Kong.
Hong Kong, meanwhile, has introduced its first collection of cryptocurrency-focused ETFs, posing a potential threat to the widely used Bitcoin products in the United States.
Rebecca Sin of Bloomberg Intelligence estimates that Bitcoin and Ether funds could accumulate approximately $1 billion in Hong Kong over the next two years.
The CEO of CF Benchmarks, a subsidiary of the cryptocurrency exchange Kraken, forecasts that by the end of 2024, Hong Kong crypto ETFs will have accumulated assets over $1 billion, overcoming their lackluster start.
