- A batch of crypto exchange platforms could be granted service licences in Hong Kong before 2025.
- Increased regulatory scrutiny has pushed some major exchanges to withdraw applications.
Hong Kong’s financial watchdog is poised to add more digital asset exchanges to its regulated roster by the year’s end.
This follows a five-month review aimed at strengthening crypto oversight in Hong Kong.
The Securities and Futures Commission, or SFC, indicated that licensed exchanges will operate under restrictions until they pass a third-party review, after which they can transition to full approval.
“The applicants have taken up our feedback, and are willing to commit resources to rectify issues,” said Eric Yip, SFC’s executive director for intermediaries, at Hong Kong Fintech Week.
A delicate balance
Hong Kong aspires to be Asia’s top crypto hub and compete with South Korea, Singapore, and other locales.
To that end, regulators swiftly approved Bitcoin and Ethereum ETFs a few months after US officials cleared the way for the mass market funds in January.
Yet officials are also labouring to curb the runaway fraud that has plagued its digital assets marketplace for the last two years.
A number of phantom exchange such as JPEX have ripped off investors of hundreds of millions of dollars in deposits, officials say.
So far, only three exchanges — OSL, HashKey, and HKVAX — have met the SFC’s stringent requirements.
Bullish, Crypto.com, and Matrixport are among the 14 platforms in the “deemed-to-be-licensed” category.
Julia Leung, the head of the SFC, recently told a local media outlet that the agency aims to grant conditional licences to firms meeting all requirements by the end of the year.
Larger push
This approach is part of a larger push to transform Hong Kong into a digital asset powerhouse with a regulatory regime that protects investors.
While stronger compliance measures may sound good to investors, they have proved too onerous for some exchanges.
OKX, Huobi, Gate.HK, and Bybit, have each withdrawn their applications to cater to Hong Kong investors earlier this year.
Although these firms didn’t specify reasons for withdrawing, a major regulatory hurdle appears to be Hong Kong’s restriction on serving mainland Chinese clients.
The JPEX scandal looms large over the regulatory push.
In September 2023, SFC warned the public about unlicensed activities and false claims of regulatory approval by a Dubai-based exchange called JPEX.
This prompted a wave of fraud complaints that led to the exchange freezing accounts and transactions. When the dust settled, customers reported losses totaling around USD 200 million.
Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.
