Hong Kong Legislator Criticizes Crypto Licensing System

Twitter icon  •  Published 1ヶ月前  •  Nikolas Sargeant

Hong Kong Legislative Council member Wu Shuo has criticized the new cryptocurrency licensing system for undermining market confidence and causing major exchanges to withdraw applications.

But In a recent article, Wu highlighted concerns about the Hong Kong Securities and Futures Commission (SFC) licensing requirements, which have prompted several major exchanges to withdraw their applications.

Set to take effect on June 1, 2023, the system mandates that virtual asset trading platforms in Hong Kong obtain a license from regulatory authorities by June 1, 2024. Failure to secure the license will result in the termination of business operations.

Major Exchanges Withdraw Applications from Hong Kong

Wu pointed out the wave of withdrawals in recent months:

  • March 28, 2024: HKVAEX, suspected to be affiliated with Binance, withdrew its license application.
  • May 14, 2024: IBTCEX, QuanXLab, and Huobi HK followed suit.
  • May 22, 2024: Gate.HK withdrew.
  • May 24, 2024: OKX HK withdrew.
  • May 31, 2024: Bybit (Spark Fintech Limited) withdrew.

These withdrawals leave only 17 virtual asset trading platforms on the application list, with 11 companies having withdrawn or returned their applications.

Wu attributed the withdrawals to the SFC's requirement that applicants for virtual asset trading platform licenses must commit to not having mainland Chinese users. This poses a challenge for traditional offshore exchanges.

OKX tried to form an industry alliance to oppose the requirement but was unsuccessful.

Industry insiders suggest that entities that have withdrawn their applications could potentially update their legal frameworks or entities and reapply in the future. However, they may not be able to reapply using a brand similar to that of an offshore exchange.

Currently, 11 platforms, including HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixincom, xWhale, YAX, Bullish, Cryptocom, WhaleFin, and Matrixport HK, remain as licensed applicants. Only OSL and HashKey have obtained formal licenses thus far.

SFC to Conduct On-Site Inspections of Crypto Platforms

The Hong Kong SFC has announced it will conduct on-site inspections of local virtual asset trading platforms (VATPs) that have not yet completed their regulatory applications after the June 1 licensing deadline.

This move serves as a reminder to crypto companies of their obligation to obtain licensing before the deadline. After June 1, all local crypto trading platforms in Hong Kong must be licensed or “deemed-to-be-licensed” by the SFC.

Meanwhile, Hong Kong has launched its first batch of ETFs focused on cryptocurrencies, potentially competing with popular Bitcoin products in the United States. Bloomberg Intelligence’s Rebecca Sin estimates that Bitcoin and Ether funds in Hong Kong could amass around $1 billion over the next two years.

Similarly, the CEO of CF Benchmarks, a subsidiary of cryptocurrency exchange Kraken, predicts that Hong Kong crypto ETFs will overcome their slow start and accumulate over $1 billion in assets by the end of 2024.

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Nikolas Sargeant

Nik is a content and public relations specialist with an ever-growing interest in Crypto. He has been published on several leading Crypto and blockchain based news sites. He is currently based in Spain, but hails from the Pacific Northwest in the US.