Nearly a dozen crypto platforms are under review in Hong Kong, as the Hong Kong Securities and Futures Commission (SFC) seeks to authorize more platforms by end of this year. The regulator is reportedly planning to grant licenses in batches to Virtual Asset Trading Platforms (VATPs) to enhance compliance.
The move is also expected to build a more regulated environment for cryptocurrency exchanges in Hong Kong. This comes amid criticism from various stakeholders of the regulators over its strict regulatory requirements for licensing of platforms.
At least 11 platforms undergo Hong Kong SFC evaluation
SFC chief executive Julia Leung told local platform HK01 on Sunday that up to 11 platforms seeking approvals to operate crypto businesses had gone through onsite evaluations. Although the 11 are now under the “deemed to be licensed” status, the SFC has warned traders from engaging the firms until they are fully licensed.
Leung also noted that the regulator expects much progress in the application process before year-end, which is also in line with their plans for granting more approvals. This also falls within the regulator’s broader two-year plan for 2024 to 2026, which includes improving regulation for the crypto industry.
According to the regulator, applications that fail to meet the regulatory requirements risk losing their licensing qualifications while the compliant ones get conditional license.
Leung also revealed during the interview that the regulator will support the tokenization of traditional products. The SFC also wants to explore the use of regional blockchain and Web3 technologies as it promotes a fair market.
This coincidentally comes as the financial regulator celebrates its 35th year anniversary.
Recently, the regulator authorized the local exchange HKVAX, which intends to start operating in the final quarter of this year.
HKVAX is the third bourse to have regulatory approval in Hong Kong adding to the already operational HashKey and OSL that also recently renewed their licenses.
Banking on the growing confidence, CoinDesk is also seeking a license and has already applied.
Hong Kong Gearing Up to Approve More Cryptocurrency Exchange Licenses by Year-End:
The Hong Kong Securities and Futures Commission (SFC) plans to approve more cryptocurrency exchanges to operate in Hong Kong by end of the year, according to its CEO Julia Leung. pic.twitter.com/v3hCp5X9bP
— Great Amechi (@GreatDude22) October 8, 2024
But there is still uncertainty in Hong Kong’s crypto industry
Although the SFC’s website shows up to 16 platforms under the novel licensing regulation, the cumulative number of applicants remains vague.
Many stakeholders have criticized the licensing process, calling it excessively rigid while others opine this will pose a barrier to Hong Kong’s aspirations of becoming a global cryptocurrency and Web3 hub.
A report released in August, unearthed “unsatisfactory practices” like substandard executive oversight of client assets and weak cybercrime defenses at some bourses.
Companies like OKX and Bybit surprisingly pulled out their applications in May despite an invitation of notable players like Coinbase to set up in Hong Kong.
A recent South China Morning Post report alluded that the withdrawal of applications might be a result of stringent SFC prerequisites, shunning mainland Chinese natives from gaining access to their services.
Additionally, the SFC has been criticized for seemingly failing to handle rogue exchanges, that have caused significant losses for clients. Last year, Dubai-based JPEX collapsed, which resulted in an estimated 2,600 Hong Kong residents losing about $200 million.
Critics blamed the regulator over the demise of the exchange and the subsequent losses that clients incurred.
This prompted the SFC to publish a lists of licensed and suspicious stock exchanges to improve awareness and transparency, according to Finance Magnates.
The JPEX incident also pushed SFC to increase its efforts to regulate the industry subsequently creating a taskforce in collaboration with the police to tackle illegal activities in the market.
Today, retail investors are limited to trading four cryptos. While the SFC has faced a lot of criticism from stakeholders for their slow pace of regulatory development, the regulator remains upbeat of finalizing its regulatory framework for cryptos by year end.
Going forward SFC is now looking into laws governing over-the-counter crypto currency trading and custody services with advise and expertise from industry specialists.
This articles is written by : Fady Askharoun Samy Askharoun
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