- A crypto exchange regime came into force in Hong Kong last year.
- The deadline for crypto exchanges to register with the SFC is approaching.
- Exchanges that fail to register face consequences.
The Securities and Futures Commission (SFC) introduced a new licensing regime for Hong Kong crypto exchanges on June 1, 2023. This move aimed to expand oversight and investor protections within the burgeoning industry. However, as the deadline for licensing applications rapidly approaches, crypto exchanges may be banned from operating within the city-state.
Hong Kong Crypto Exchanges Face Deadline
Under the SFC’s regulatory requirements, crypto exchanges in Hong Kong face a February 29 deadline to submit their licensing applications or close their operations by May 31. Only OSL Exchange and Hashkey Exchange have been granted Hong Kong crypto exchange licenses; both were approved before the regime started on June 1, 2023.
According to the SFC’s latest information, 14 virtual asset trading platforms currently have applications pending approval by the regulator. These include Hong Kong Digital Asset EX Limited and Hong Kong VAEXC Limited (VAEX,) plus 12 others who submitted their bids between October 2023 and January 31, in Bybit’s case.
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VAEX was among the late stragglers, submitting its application in November 2023. Local media has reported suspected ties between VAEX and Binance, noting that the company fetches content from Binance servers. VAEX CEO Stanley Fung stated the company is independent, while Binance confirmed that VAEX is not a Binance company, distinct from the term “Binance affiliates.”
While VAEX and Binance downplayed their purported relationship, Hong Kong remains cautious, especially in the wake of the high-profile JPEX scandal. This incident highlighted the risks associated with cryptocurrency investing, emphasizing the importance for regulators to strike a balanced approach in their oversight.
Cautious Approach
Representing the government’s position on the Hong Kong crypto landscape, the Secretary for Financial Services and the Treasury, Christopher Hui, recently reminded investors that digital assets have “no intrinsic value, and that the prices are highly volatile.”
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However, Hui affirmed that Hong Kong remains committed to fostering crypto financial innovation by balancing prudent regulation and promoting a dynamic crypto landscape. Looking to the future, Hui revealed that regulators are working on stablecoin regulation in light of public consultation, introducing a regulatory sandbox, and considering over-the-counter OTC regulation.
On the Flipside
- Political turmoil from the 2020 protests has impacted Hong Kong’s reputation as a global financial center, with Singapore now viewed as better for business and investment.
- Hong Kong is a small market with an estimated 245k crypto investors.
- Hong Kong is considered a proxy for China, giving crypto exchanges an added incentive to register with the SFC.
Why This Matters
The looming crypto exchange registration deadline highlights the regulatory pressures governments face balancing financial innovation and consumer protection. However, by imposing a hard registration deadline, the region risks falling further behind Singapore as crypto businesses weigh the costs and benefits of conducting business in Hong Kong.
Read about Hong Kong authorities taking a stand against the controversial Worldcoin project here:
Hong Kong Privacy Watchdog Raids Worldcoin Offices
Find out more about Andrew Tate’s denial over crypto scam allegations here:
Andrew Tate Mocks Crypto Investors After Bait and Switch
