HK to Inspect Crypto Platforms’ Offices as Licensing Deadline Looms: Key Update for Bitcoin (BTC) and Ethereum (ETH) Investors

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  <li>Hong Kong’s Securities and Futures Commission (SFC) has recently announced it will conduct in-site office inspections for the crypto platforms seeking licensing.</li>
  <li>The watchdog highlighted that the 18 “deemed-to-be-licensed” applicants would have to undergo the examination to receive approval of their application.</li>
  <li>The on-site inspection will focus on the crypto platforms’ safeguarding of client assets and Know-Your-Customer (KYC) processes to determine the company’s compliance with the SFC’s regulatory requirements.</li>
</ul>
<p><strong>Hong Kong’s SFC to conduct rigorous inspections on crypto platforms applying for licensing, ensuring compliance with regulatory standards.</strong></p>
<h2><strong>SFC Announces Crypto Inspection</strong></h2>
<p>On Tuesday, the SFC revealed that it would inspect the platforms applying to become licensed virtual asset trading platforms (VATPs) in Hong Kong. The examination will occur in the coming months while the deemed-to-be-licensed VATP applicants pursue their applications.</p>
<h3><strong>Focus on Compliance and Client Protection</strong></h3>
<p>The on-site inspection will focus on the crypto platforms’ safeguarding of client assets and Know-Your-Customer (KYC) processes to determine the company’s compliance with the SFC’s regulatory requirements. The inspection findings “will feed into the license application process,” which requires VATPs and their owners to comply with all applicable laws and regulations. According to the announcement, any violation or non-compliance of key regulatory requirements will result in the license being denied.</p>
<h2><strong>Non-Contravention Period Ends This Week</strong></h2>
<p>In the announcement, the SFC pointed out that the key deadline was approaching. Hong Kong’s watchdog reminded crypto platforms that the non-contravention period for VATPs operating in the jurisdiction ends on June 1, 2024. As reported by CoinOtag, the SFC issued a new regulatory guideline that required all VATPs operating in Hong Kong to submit a license application by February 29. After the deadline, the crypto platforms that didn’t apply for a license had a non-contravention period under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).</p>
<h3><strong>Implications for Non-Compliant Platforms</strong></h3>
<p>However, by June 1, all VATPs remaining in the area must be licensed or “deemed-to-be-licensed” VATP applicants under the AMLO. The companies that continue to operate after the designated period will face legal actions: It is a criminal offense to operate a VATP in Hong Kong in breach of the AMLO, and the SFC will take all appropriate actions against any breaches of the law.</p>
<h3><strong>Conclusion</strong></h3>
<p>As the end of the non-contravention period approaches, Hong Kong’s regulator urged investors in the area to trade virtual assets only on SFC-licensed platforms. Additionally, Hong Kong investors were reminded that the VATP applicants are not formally licensed despite undertaking measures to comply with the SFC. At the time of this writing, only HashKey Exchange and OSL Exchange are licensed VATPs operating in the area. The other 18 VATPs await the SFC’s decision on their license applications.</p>