Hong Kong’s Unlicensed Crypto Exchanges to Cease Operations by May, 22 Applicants Pending Approval

Hong Kong Regulator Halts Crypto Exchange License Applications

The Securities and Futures Commission (SFC) of Hong Kong has ceased accepting license applications from cryptocurrency exchanges as of 29 February. Any exchanges failing to file for licenses by this date must close their operations in Hong Kong by 31 May 2024.

Regulatory Deadline for Compliance

All crypto exchanges in Hong Kong that have not applied for licenses are required to wind up their business by 31 May 2024. The SFC emphasises the importance for investors to transition to licensed platforms promptly.

Licensed Operators and Applicants

OSL Digital Securities and HashKey Exchange are the first two crypto trading operators licensed by the Hong Kong SFC. Additionally, 22 trading platforms, including larger players like Bybit, OKX, and Crypto.com, have applied for licenses. Gate.io, HTX, and Bullish, among others with notable trading volumes, also featured on the list. Binance has reportedly applied for a license through HKVAEX. However, Coinbase, the top United States platform, and Kraken, another popular trading venue, are missing from the list.

Huobi HK’s Resubmission

Justin Sun-linked Huobi HK, the Hong Kong arm of HTX, initially withdrew its application to become a licensed crypto exchange in the region on February 23, as reported by the South China Morning Post. However, following the report, Huobi HK reappeared on the Securities and Futures Commission's list of license applicants on February 26. Despite the lack of official comment from Huobi HK, it's speculated that the firm is refining its application ahead of the SFC's deadline.

HashKey Exchange's Approval for Crypto Services Expansion in Singapore

In the meantime, HashKey Exchange has received in-principle approval from the Monetary Authority of Singapore (MAS) for its major payment institution license application. This signifies a positive step towards offering a regulated over-the-counter trading solution for institutional and accredited investors, further solidifying their position in the digital asset market.

Public Awareness and Risk Mitigation

The SFC aims to inform citizens about associated risks by maintaining a public list of non-compliant crypto platforms. Marketing activities for these platforms will be prohibited in Hong Kong during the wind-up period.

Transition Period Restrictions

Throughout the closure period, operational capabilities of non-compliant exchanges will be limited, and marketing activities will be forcibly terminated. By 1 June 2024, the SFC will release a list of licensed exchanges; however, license procurement is not guaranteed for all applicants.

Future Trading Prospects

Once licensed, crypto exchanges can facilitate Bitcoin trading for retail investors. The SFC is also reviewing various altcoins and stablecoins for potential trading approval.

Challenges and Concerns

Blockchain investigator ZachXBT has raised concerns about suspicious activity on BitForex, a Hong Kong-based crypto exchange. In addition to these suspicions, the exchange has encountered recent communication issues and suspended withdrawals for at least three days. Users have reported difficulties accessing their accounts, experiencing a lack of asset visibility, and encountering problems with website access.

Blockchain investigator ZachXBT warned on the redflags spotted regarding BitForex. (Source: X.com/@zachxbt)

Navigating Regulatory Compliance

Hong Kong's stance on crypto seems cautious but calculated. While cracking down on unlicensed platforms and protecting investors, they're also laying the groundwork for a regulated future with licensed exchanges and potential retail access to Bitcoin. This "clean-up" phase could create uncertainty in the short term, but it might pave the way for a more stable and secure crypto environment in Hong Kong in the long run.

As Hong Kong's crypto exchange landscape undergoes regulatory restructuring, investors and operators must adapt to ensure compliance and mitigate associated risks. The closure of non-compliant platforms highlights the significance of regulatory adherence in the evolving crypto ecosystem.