More monks and less rice? Who will win among the 17 Hong Kong virtual asset license applicants?

Before the Spring Festival of the Year of the Dragon, the Hong Kong Securities and Futures Commission "suddenly" issued a document announcing that if a virtual asset trading platform operating in Hong Kong under the transitional arrangement does not report to the Securities and Futures Commission on or before February 29, 2024, will submit a license application and will have to end its operations in Hong Kong on or before May 31, 2024. If the investor frequently operates a virtual asset trading platform in Hong Kong and is not on the "List of Licensed Virtual Asset Trading Platforms" or the "List of Applicants for Virtual Asset Trading Platforms", he or she needs to do so as early as possible before May 31, 2024. Prepare to close the accounts on these virtual asset trading platforms, or transfer to a virtual asset trading platform licensed by the China Securities Regulatory Commission to buy and sell virtual assets.

After this news was released, it immediately aroused huge attention in the encryption industry, followed by a wave of "applications", Koala Finance found , a total of 8 institutions have submitted applications for virtual asset trading platform licenses to the Hong Kong Securities and Futures Commission from January to February 2024, while there were only 5 institutions from November to December 2023, which means that virtual asset trading in the past two months The number of applications for platform licenses has doubled compared with before. So far, the number of applicants for virtual asset licenses in Hong Kong has reached 17.

So, who can ultimately win on this crowded track? Koala Finance will conduct a detailed analysis in this article.

In fact, according to the regulations of the Hong Kong Securities and Futures Commission, applicants for virtual asset trading platform licenses need to meet a series of conditions, such as:

1. A company established in Hong Kong with a fixed place of business, or a company established elsewhere but registered in Hong Kong in accordance with the Companies Ordinance;

2. Have passed the fit and proper test of the Hong Kong Securities and Futures Commission;

3. Have sufficient property, knowledge and experience;

4. Have sound risk management, anti-money laundering/anti-terrorist financing, customer asset management, financial reporting and disclosure, trading policies, network security and other systems and measures.

Based on the above conditions, Koala Finance plans to analyze by type:

1. Applicants with a leading cryptocurrency exchange background

Applicants currently submitting applications for a virtual asset trading platform license to the Hong Kong Securities and Futures Commission Among them, some have backgrounds in leading cryptocurrency exchanges, such as:

• Hong Kong Virtual Assets Exchange Co., Ltd. HKVAX;

• Hong Kong Digital Asset Trading Group Co., Ltd. HKbitEX;

• OKX Hong Kong FinTech Company Limited (OKX);

• BX SERVICES LIMITED (HKVAEX, rumored to have Binance background);

• Spark Fintech Limited (Bybit)

• Foris DAX HK Limited (Crypto.com)

• Hong Kong VAEXC Limited (VAEXC, rumored to have a KuCoin background)

• NewBX Limited (Bixin)

The exchanges supported by these applicants generally have strong financial strength, mature operational experience and technical strength, have a broad user base in the global market, and have basically established A complete compliance system can meet the licensing requirements of the Hong Kong Securities Regulatory Commission. In fact, relevant cryptocurrency exchanges have made certain progress in compliance, actively communicated with regulatory agencies, and made active arrangements.

Advantages: Such applicants often have strong financial strength, mature operational experience and technical strength, and have Extensive user base and established a complete compliance system;

Disadvantages: Facing greater pressure from regulatory agencies and requiring investment More resources for compliance construction.

2. Applicants with a background in traditional financial institutions and securities services

Among the applicants currently submitting virtual asset trading platform license applications to the Hong Kong Securities and Futures Commission, some have backgrounds in traditional financial institutions and securities services, such as:

• Victory Digital Technology Co., Ltd. (VDX)-Victory Securities

• Hong Kong BGE Limited (BGE)-Dasheng Securities

• Hong Kong Digital Asset EX Limited (HKbitEX)-Tai Chi Capital< /p>

• Panthertrade (Hong Kong) Limited (Panthertrade)-Futu Securities

These traditional financial institutions and securities service providers have rich experience in risk management, compliance management, etc., and can provide investors with safer and more reliable trading services. In addition, these institutions also have huge customer resources and can bring more potential users to the virtual asset trading platform.

Advantages:This type of applicant has rich experience in risk management, compliance management, etc., and has huge customer resources and brand awareness;

Disadvantages: Lack of experience in the field of virtual asset trading and relatively weak technical strength.

3. Applicants with other financial industry backgrounds

• Accumulus GBA Technology (Hongkong) Co., Limited cloud account Greater Bay Area Technology (Hongkong) Co., Ltd. (Accumulus)

• DFX Labs Company Limited (DFX Labs)

• Thousand Whales Technology ( BVI) Limited (xWhale)

• HighBlock Limited (bitV)

• YAX (Hong Kong) Limited (YAX)

• Bullish (GI) Limited (Bullish)

These applicants with other financial industry backgrounds usually have strong technical strength and resource advantages and can provide virtual asset trading platforms. Provide a more convenient and efficient service experience. In addition, these companies also have certain layouts in areas such as blockchain and can provide more innovative services for virtual asset trading platforms.

Advantages: Such applicants generally have strong technical strength and resource advantages, and can provide more convenient and efficient services. experience, and has a certain layout in areas such as blockchain.  

Disadvantages: Lack of experience in financial supervision, and license application may be uncertain.

Summary

Hong Kong’s virtual asset regulatory policy remains Continuous improvement and future changes in regulatory policies may have an impact on the results of license applications. Not only that, competition in the virtual asset trading market is also becoming increasingly fierce. Competition among leading exchanges may intensify and have a negative impact on the survival of small and medium-sized exchanges. Threats, new technologies may have an impact on the operating model and competitive landscape of virtual asset trading platforms, and these factors will affect the approval of regulatory agencies.

Of course, who will win in the end depends on the review results of the Hong Kong Securities Regulatory Commission. The Hong Kong Securities Regulatory Commission will conduct a comprehensive assessment of the applicant’s qualifications and base on its Compliance, operational capabilities and other factors make the final decision.