- The Hong Kong Securities and Futures Commission (SFC) has recently granted preliminary approval to 11 cryptocurrency exchanges for ongoing operations within its jurisdiction.
- This preliminary approval marks a significant stride towards issuing Virtual Asset Trading Platform (VATP) licenses, a process initiated in 2022. Hong Kong is positioning itself as a notable crypto hub, rivalling cities like Singapore and Dubai.
- Among the approved exchanges, Crypto.com, originally established in Hong Kong but currently operating from Singapore, stands out as the largest entity “deemed to be licensed,” according to a South China Morning Post report.
Discover how Hong Kong’s recent regulatory approvals could reshape its crypto landscape, as the city vies to establish itself as a leading digital asset hub.
Hong Kong’s Crypto Exchange Scene Faces Regulatory Hurdles
Hong Kong’s drive to become a leading crypto hub has seen significant developments, most notably the initial licensing approvals granted by the Securities and Futures Commission (SFC). Among the approved exchanges, Crypto.com is notably the largest by 24-hour trading volume as measured by CoinGecko, still navigating the final steps of the licensing process. Bullish, operating from multiple locations including Singapore and New York, is another major exchange to receive approval under this new regulatory framework.
These regulations, introduced last year, mandate that cryptocurrency exchanges must secure such approvals to continue their operations while awaiting full licensing. The deadline for exchanges that chose not to seek a license to cease operations was June 1. However, several exchanges, including major names like OKX, Binance, and HTX, have withdrawn their license applications due to regulatory complications.
These withdrawals largely involve exchanges with historical ties to mainland China, where strict crackdowns on digital assets have forced them to relocate.
Market Confidence Shaken?
The withdrawal of license applications by several exchanges has raised concerns about Hong Kong’s ability to attract and support crypto-related businesses. Legislative Council member Duncan Chiu, representing the information technology sector, has highlighted these concerns, noting that the market confidence in Hong Kong’s Web3 ambitions has been significantly impacted.
Despite hopes of tapping into the vast customer base in mainland China, Beijing’s stringent ban on commercial crypto activities remains a formidable barrier. The financial authority of Shenzhen, Hong Kong’s neighboring city, recently reiterated the illegal status of cross-border cryptocurrency trading, reinforcing that such activities could result in criminal liabilities and stressing the risks associated with crypto-related fraud.
The notice from Shenzhen also emphasized the prohibition of providing internet services to mainland customers without proper authorization.
Overall, while Hong Kong’s preliminary approvals are a pivotal step towards establishing a regulatory framework for crypto exchanges, significant challenges persist. The integration of rigorous compliance requirements and maintaining market confidence are crucial to the city’s vision of becoming a global crypto hub.
Conclusion
In summary, Hong Kong’s initial approvals for cryptocurrency exchanges are a significant advancement in its efforts to position itself as a global crypto hub. However, the withdrawals of license applications by some major exchanges underscore the challenges posed by stringent regulations and mainland China’s prohibitive stance. The future success of Hong Kong’s crypto market will hinge on striking a delicate balance between fostering a supportive regulatory environment and maintaining robust market confidence.
