Current status of Web3 in Hong Kong: only 2 officially licensed

Author: Frank

On June 1, the transition period of the licensing system for virtual asset trading platforms in Hong Kong officially ended, and the result made the crypto community "disappointed". Previously, trading platforms that had no hope of obtaining licenses had announced their withdrawal from the Hong Kong market one after another.

Although only two institutions were officially licensed, the Hong Kong Securities and Futures Commission also updated the list of 11 platforms that were "deemed to have been licensed" and the list of 6 platforms that are still on the application list. As of June 3, PANews found that the Hong Kong Securities and Futures Commission has removed the "deemed licensed" list and unified it into a "list of virtual asset trading platform applicants", and issued a reminder that "the Securities and Futures Commission urges investors to buy and sell virtual assets only on virtual asset trading platforms licensed by the Securities and Futures Commission.

The Securities and Futures Commission reminds investors that applicants for virtual asset trading platforms deemed to be licensed have not been formally licensed by the Securities and Futures Commission", which may be to avoid misunderstandings.

On the whole, the existing applicants and licensed platforms are mostly local financial institutions in Hong Kong and companies with resources from mainland China. Almost all large crypto-native exchanges have withdrawn from the competition for Hong Kong licenses.

Two licensed trading platforms

HashKey Exchange: Wanxiang Exchange

Hash Blockchain Limited is a company belonging to HashKey Group, headquartered in Hong Kong. The investor behind HashKey Group is Wanxiang Blockchain Lab, and Wanxiang Blockchain is part of Wanxiang Group's strategic layout in the blockchain industry.

Lu Guanqiu, the founder of Wanxiang Group, is known as the three leading figures of Zhejiang businessmen along with Jack Ma and Zong Qinghou. On May 31, HashKey Exchange announced that it had obtained the AMLO license from the Hong Kong Securities and Futures Commission (operating a virtual asset trading platform under the Anti-Money Laundering Ordinance), marking that HashKey Group has become a fully licensed virtual asset platform in Hong Kong.

OSL Exchange: Same investor as Bitget

OSL Exchange is the first licensed virtual asset exchange in Hong Kong. The company behind it is OSL Group, a Hong Kong-based financial technology company that focuses on providing blockchain technology solutions and digital asset services. Its executive team comes from well-known financial giants such as HSBC, Morgan Stanley, and Accenture.

OSL Group was previously known as BC Technology Group. In January 2024, BGX Group subscribed for new shares of OSL Group worth HK$710 million and became the largest shareholder of OSL with 29.97%. The actual controller of BGX Group is also one of the investors of Bitget Exchange.

11 platforms deemed to have been licensed

HKbitEX: Founded by former senior executives of the Hong Kong Stock Exchange

Hong Kong Digital Asset EX Limited (HKDAEx) was founded by several former senior executives of the Hong Kong Stock Exchange, including former Managing Director of the Hong Kong Stock Exchange Gao Han.

The group's business scope includes securities and commodity trading, fund and asset management, metaverse and Web 3 technology, transaction registration and clearing, trust and asset custody, fund establishment and management, and wealth management and family office services. HKFAEx Group has completed many cases of converting collectibles into virtual assets and promoted copyright NFT as an investable asset class. The group is also a major shareholder of Nasdaq-listed Oriental Culture Group (OCG.US).

HKbitEX has been issued an in-principle approval by the Hong Kong Securities and Futures Commission for a virtual asset trading platform (VATP) license for Type 1 regulated activities (securities trading) and Type 7 regulated activities (providing automated trading services).

PantherTrade: A platform under Futu

PantherTrade is a subsidiary of Futu Holdings and is headquartered in Hong Kong.

The company focuses on the development and operation of virtual asset trading platforms. Panthertrade has recruited team members with expertise in the fields of encryption and investment, such as Chen Zhihu, the former investment director of Huobi Asset Management (Hong Kong) Co., Ltd., and the initial director Fang Xingzhi has a background in JD Securities Co., Ltd.

Accumulus: A subsidiary of Tianjin's major taxpayer Yunhuo

Accumulus was established on September 2, 2022 by Yunhuo Technology (China) Co., Ltd. (referred to as Yunhuo). Yunhuo is an Internet platform that provides services for workers (freelancers) in new employment forms. According to official statements, it has provided services to more than 83 million people in 120 countries and regions, with total revenue of 108.4 billion yuan in 2023. In 2021, Yunhuo ranked first among Tianjin's private enterprises with a tax payment of 3.366 billion yuan.

Yunhuo shares a database with the Tianjin Municipal Public Security Bureau and has established cooperation with the latter in tracing pyramid schemes, illegal fundraising, gambling, drug crimes, smuggling, and trafficking in women and children. Yang Hui, chairman of Yunhuo, is also a member of the National Committee of the Chinese People's Political Consultative Conference. In recent years, many leaders have investigated the company. Since 2021, Cloud Account has accepted annual research projects commissioned by the Supreme People's Court, the Supreme People's Procuratorate, and the National Audit Office six times.

DFX Labs: Senior executives come from BGE and HashKey

DFX Labs Company Limited is a professional virtual asset service provider based in Hong Kong, established on May 2, 2023. Simon Au Yeung, COO of DFX Labs, graduated from the Wharton School of Business. Previously, he served as CEO of Blockchain Finance and BGE. The company's CTO David Hui was the technical director of HashKey Group.

Bixin.com: An old encryption company

NewBX Limited is a private company limited by shares, registered in Hong Kong on August 2, 2019. The company behind it is Bixin Group. The predecessor of Bixin.com platform was HaoBTC, which was established in 2014 and is one of the old cryptocurrency exchanges.

Bixin Group's current business involves mining machine research and development and manufacturing, mining operations, custodial wallets, MPC wallets, hardware wallets, trading platforms, public chains, venture capital, etc. Its founder Wu Gang started to get involved in Bitcoin in 2009 and is a hardcore Bitcoin player.

xWhale: Huasheng Securities under Sina is the major shareholder

Thousand Whales Technology (BVI) Limited was registered in Hong Kong on April 11, 2022. It is a virtual asset exchange invested by Huasheng Capital Group under Sina. It is jointly invested by Huasheng Capital Group, Longling Capital and Vcredit (HKG: 2003). Longling Capital is an equity investment company founded by the famous angel investor Cai Wensheng.

YAX: Tiger Brokers Incubation

YAX (Hong Kong) Limited was established on March 16, 2023. The company is backed by YAX, a global cryptocurrency trading platform that provides virtual asset trading, custody and other services. YAX is a platform incubated by employees of Tiger Brokers, which is backed by smartphone maker Xiaomi.

Bullish: EOS development company Block.one

Bullish (GI) Limited is a company established by Block.one, which mainly operates the Bullish exchange. Block.one is a company that develops and supports the EOSIO open source software. The Bullish exchange is backed by Block.one and its investors, and received a capital injection including 200,000 EOS at launch.

Crypto.com: Singapore Compliant Exchange

Foris DAX HK Limited is a cryptocurrency trading company registered in Hong Kong and was established on August 22, 2018.

The platform behind the company, Crypto.com, is a cryptocurrency exchange based in Singapore. It currently has more than 100 million users and has obtained Singapore's MAS license.

WhaleFin: Amber

Whalefin Markets Limited is a Hong Kong-based company that focuses on providing trading and management services for cryptocurrencies and digital assets. The company is a digital asset platform operated by Amber Group, which was founded in 2017 and is headquartered in Hong Kong.

The company focuses on digital wealth management and cryptocurrency liquidity solutions, providing high-net-worth investors and institutions with a comprehensive range of products and services, including trading, asset management, consulting and research. In February 2022, Amber Group received $200 million in financing led by Temasek, with participation from Sequoia China, Pantera Capital, Coinbase Ventures and Tiger Global Management.

Matrixport HK: Jihan Wu's Platform

Flying Hippo Technologies Limited was incorporated on May 22, 2019 and is headquartered in Wan Chai, Hong Kong. The company behind it, Matrixport, is a Singaporean blockchain financial services platform founded in 2019 by Jihan Wu. The company manages more than $10 billion in assets and has a monthly trading volume of more than $5 billion.

There are still 6 platforms on the application list

BGE: The major shareholder may be the son of the "King of Gambling on the High Seas"

Hong Kong BGE Co., Ltd. is a wholly-owned subsidiary of HKE Holdings Limited (HKE Holdings Limited, stock code: 1726), a Hong Kong main board listed company. According to the official website, its main businesses include providing software as a service (SaaS) solutions, brokerage services, automatic trading platforms and insurance custody services, specifically for institutional and professional investors. Its parent company HKE is involved in multiple business areas, especially in financial technology and digital asset services. In addition to the virtual asset trading platform, the company is also engaged in traditional engineering and construction business.

In recent years, the company has paid special attention to expanding its digital asset and blockchain platform business. Applying for a virtual asset exchange does not seem to have brought much stock price stimulus to the company. As of early June 2024, the share price of HKE Holdings Limited fell by about 5.85% from the beginning of the year.

Its executive chairman, Man-Lin Ho, is currently the executive vice chairman of the Hong Kong Volunteer Association Limited, executive chairman of Hong Kong Telecom Holdings Limited, chairman of Wing Wing International Limited, vice chairman and secretary general of the Youth Inspirational Foundation, director of the Tung Wah Group Hospital Group, executive director of the Hong Kong Federation of Youth Groups, and member of the All-China Youth Federation. HK BGE once hired Thor Chan as CEO, who is the former CEO and co-founder of the now defunct crypto exchange AAX; HK BGE's parent company HKE Holdings has a market value of approximately 2.3 billion yuan, and the company's chairman and major shareholder is Lian Haomin. It is speculated that he is the son of Lian Zhuozhao, who is known as the "King of High Seas Gambling", but this has not been confirmed.

HKVAX: Founded by CITIC Futures and HSBC executives

Hong Kong Virtual Asset Exchange Limited was established in 2019 by local Hong Kong entrepreneurs. The company plans to introduce new product categories such as security token issuance (STO) to lay out investment opportunities in Web3.

HKVAX's business includes providing professional investors with over-the-counter (OTC) brokerage services, institutional-grade trading platforms, and 100% insurance-covered asset custody services. The main service customers are professional investors including venture capital, brokerage firms, high-net-worth individuals, institutional investors, asset management companies, quantitative funds, private equity and hedge funds.

In addition, the HKVAX official website stated that it has obtained in-principle approval from the Hong Kong Securities and Futures Commission (SFC) to conduct regulated activities of Category 1 (securities trading) and Category 7 (providing automated trading services). Co-founder Wu Weiliang was the managing director of CITIC Futures International Department. Co-founder Huo Zhaoliang was the head of anti-money laundering compliance for HSBC in Hong Kong and Asia.

VDX: Victory Securities of Hong Kong

 Victory Fintech Company Limited was established on August 5, 2021. The company behind it is Victory Securities of Hong Kong. In 2018, Victory Securities established the VDX team, which specializes in the development of digital currency trading systems.

The company's executive directors include Gao Juan, Chairman of the Hong Kong Securities Association. It also holds the Securities and Futures Commission's No. 1 (virtual asset trading), No. 4 (virtual asset consulting services) and No. 9 (virtual asset asset management services) licenses. Zhou Lele, managing director of Victory Securities, co-founder and chief business officer of VDX, said that he hopes that after obtaining the SFC license, the revenue brought by VDX can account for 20% of Victory Securities' revenue within three years.

bitV: Participating in the launch of a HK$1 billion ETF liquidity fund

HighBlock Limited is a Hong Kong-based company founded on October 27, 2023, with limited public information. In May of this year, the company launched a HK$1 billion Hong Kong ETF liquidity fund with LD Capital and Antalpha Ventures.

HKX: Web3 Crypto Banking Service Platform

hi5 (Hong Kong) Limited is a private limited company established on October 28, 2019, headquartered in Hong Kong. The company behind it is hi.com, a platform engaged in Web3 crypto banking business. The co-founder is Sean Rach, the former chief marketing officer of Crypto.com. hi.com has more than 120 employees in offices in Asia and Europe. The number of registered people exceeds 3.5 million. The hi.com platform has currently issued the token $HI, with a current market value of approximately US$2.4 million.

Bitcoinworld: Hong Kong-listed Metaverse Company

Bitcoin World Technology Limited is a wholly-owned subsidiary of BYTE META (08645.HK) and has obtained licenses No. 1 and 7. BYTE META was formerly known as Mi Chong Meta Universe and changed its name in 2024. According to media reports, in August 2023, its subsidiary Mi Chong Internet (Wuhan) Co., Ltd. was frozen by the court for suspected pyramid selling.

Regarding the current licensing situation of the Hong Kong Stock Exchange, Hong Kong Legislative Council member Qiu Dagen commented, "Most of the remaining applicants are small in scale, some lack industry experience, and some are traditional financial institutions trying to get involved in VATP (virtual asset trading platform) business and have not delved into the Web3 field. Under strict supervision, many industry insiders are worried that even if operators are approved for licenses, it will be difficult to maintain profitability."

Regarding the market's concerns about many native encryption platforms launching Hong Kong license applications, Weng Xiaoqi, CEO of the licensed Hashkey Exchange, revealed to the media that many persons in charge who withdrew from the application have reported their disappointment to him.

Weng Xiaoqi believes that "the root cause behind this situation is that according to market observations and evaluations, the China Securities Regulatory Commission may not be equipped with enough staff to conduct a comprehensive review of all Native Web3 institutions. Optimistically, after the risk control level is set, supervision will enter a new stage. Now, the "steady and prudent period" of "steady and prudent development" has ended in stages and entered the development period." In addition, some trading platforms that have withdrawn their applications stated that they are currently undergoing rectification and plan to resume Hong Kong business after obtaining a license in the future.