Hong Kong’s Securities and Futures Commission (SFC) is planning to expand licensing for crypto exchanges and digital asset firms by the end of the year.
By the conclusion of 2024, the Securities and Futures Commission (SFC) of Hong Kong intends to authorize more cryptocurrency exchanges. Eric Yip, the Executive Director for Intermediaries at the SFC, disclosed this information during Hong Kong’s annual Fintech Week event. Additionally, he gave an overview of the city’s ongoing regulatory initiatives.
According to Yip, the commission has been collaborating closely with applicants, providing feedback that has prompted numerous exchanges to allocate sufficient resources to guarantee full compliance with regulatory standards.
It is important to note that the city implemented its digital-asset licensing framework in June 2023, facilitating retail crypto trading on licensed platforms. Nevertheless, only three platforms—HKVAX, HashKey, and OSL—have been granted full licenses thus far. Currently, 11 additional entities operate under a provisional permit, awaiting final approval upon satisfying the SFC’s compliance requirements.
By the conclusion of December, the regulator intends to finalize the list of fully licensed exchanges and conclude the licensing process.
SFC Enhances Oversight
The crypto exchanges that are currently being reviewed have encountered numerous obstacles during their regulatory journey. During inspections, the SFC identified numerous compliance issues among these “deemed-to-be-licensed” platforms. In October, Julia Leung, the agency’s Chief Executive, observed that these inspections identified areas in which firms failed to comply.
Operational licenses will be issued to the firms after implementing the required modifications. Nevertheless, Yip declared that exchanges would only achieve complete operational freedom after they have conducted a comprehensive third-party review in conjunction with the SFC.
The SFC intends to cultivate a collaborative regulatory environment that prioritizes investor protection and market stability by establishing a consultative panel with these licensed exchanges by early 2025.
Several significant exchanges, including OKX, Gate.io, and HTX, have chosen to withdraw their applications during this rigorous licensing process, citing regulatory challenges. Nevertheless, the SFC’s website continues to list companies such as Bullish and Crypto.com as license applicants, indicating the continued interest in the cryptocurrency sector in Hong Kong.
New Regulations for Artificial Intelligence in Finance
Hong Kong is also advancing regulatory measures for artificial intelligence (AI) within finance and expanding its crypto licensing. In a separate statement on Monday, government officials delineated the city’s initial set of AI policy guidelines, designed to enhance AI’s role in financial markets and other critical sectors. These guidelines promote the establishment of a unified framework for regulatory agencies’ implementation of AI.
Furthermore, Hong Kong implemented tax incentives dedicated to cryptocurrencies as part of its ongoing endeavors to recruit global crypto talent. Christopher Hui Ching-yu, the Secretary for Financial Services and the Treasury, characterized Hong Kong’s financial sector as “uniquely positioned” to facilitate the adoption of AI, citing its “sizable markets and rich scenarios.” He confirmed the government’s dedication to enacting legislation by the end of the year.
