- China’s regulatory pressure is pushing crypto firms away from Hong Kong.
- OKX, Gate.io, KuCoin, Binance, and HTX have withdrawn their VATP license application in Hong Kong.
- The SFC has reminded firms on the June 1 license deadline to continue operating in Hong Kong.
China’s regulatory clampdown is forcing top crypto firms to reconsider their operations in Hong Kong, leading to significant industry shifts.
Major Crypto Firms Withdraw VATP License Applications
Regulatory pressure from mainland China is prompting many top crypto firms to withdraw their license applications in Hong Kong. According to reports, local affiliates of top exchanges with ties to mainland China, including OKX, Gate.io, KuCoin, Binance, and HTX, have all rescinded their applications for a Virtual Asset Trading Platform (VATP) license in Hong Kong.
Impact of Mainland China’s Regulatory Environment
Despite launching in China, all of the listed crypto firms have expanded their operations to other regions after an initial regulatory clampdown by the Chinese authorities. However, they expressed renewed interest in Hong Kong’s new virtual asset regulatory regime that commenced last June, which requires them to obtain licenses to operate in the city.
Stringent SFC Requirements
Notably, part of the conditions in the new regime was to allow those firms with a preexisting presence in the city to operate without a license for one year. However, those who have withdrawn their applications have no option but to cease operations in Hong Kong.
Challenges in Complying with SFC Regulations
Meanwhile, reports from within the region suggest that stringent demands from the Securities and Futures Commission (SFC) may have contributed to the crypto firms withdrawing their applications. It also adds that the inability to serve customers from mainland China may have also played a significant role.
June 1 Deadline and Compliance Obligations
In a recent reminder, the SFC told exchange operators they must be “deemed to be licensed” by June 1 to continue operating in Hong Kong. The commission stressed VATP’s obligation to fully comply with applicable laws and regulations, particularly emphasizing the need for firms to prevent mainland Chinese residents from accessing any of their virtual assets-related services.
Historical Context of China’s Crypto Clampdown
China escalated its crypto clampdown in 2021 when its apex bank warned that offering crypto services within its mainland borders violated the law. Many exchanges moved offshore following the development, leaving behind limited operational systems that appear to be threatened by further restrictions.
Conclusion
The regulatory landscape in Hong Kong, influenced by mainland China’s stringent policies, is causing significant operational shifts for major crypto firms. As these companies navigate the complex regulatory environment, the future of crypto operations in Hong Kong remains uncertain, with compliance and strategic relocation being key considerations.
