Challenges Emerge for Hong Kong’s Crypto Exchanges as Licenses Hang in Balance

by

As a seasoned crypto investor with over a decade of experience navigating the volatile digital asset landscape, I find myself closely monitoring the developments in Hong Kong, a city that has long held potential as a leading digital asset hub. However, recent events have cast a shadow over this ambition, with uncertainty looming over the licensing status of 11 crypto exchanges.

The ambitious endeavor by Hong Kong to become a premier digital currency exchange center is facing substantial hurdles, with doubts arising about the fate of 11 platforms awaiting final licensing approval.

As per a report by Kiuyan Wong for Bloomberg, these exchanges initially gained approval but are currently being reviewed by Hong Kong’s Securities and Futures Commission (SFC).

According to Bloomberg’s report, the Hong Kong Securities and Futures Commission (SFC) has found questionable practices in the so-called “licensed” trading platforms during their on-site inspections. Some of these exchanges are overly reliant on a small group of executives for handling client assets, which is a cause for concern. Furthermore, Bloomberg points out that some of these platforms lack sufficient measures to guard against cybercrime, adding to the worries about their security.

The specific exchanges that fell short of the SFC’s standards remain unidentified. Bloomberg indicates that the inspections are ongoing and subject to change. This adds to Hong Kong’s challenges as it aims to cultivate a thriving crypto center amid an already cautious regulatory approach.

The investigations being reviewed involve prominent international companies like Crypto.com and Bullish, as well as others such as HKbitEX, PantherTrade, and Matrixport HK, according to a report by Bloomberg. Crypto.com declined to comment on the inspections, while the other exchanges did not respond to inquiries from Bloomberg.

A representative from the Securities and Futures Commission (SFC) informed Bloomberg that these inspections are intended to verify that applicants comply with regulatory rules, particularly regarding the protection of client funds and the use of ‘know-your-customer’ procedures. In addition, Bloomberg has learned that if platforms fail to address significant issues or even have their applications denied outright by the SFC due to unresolved critical deficiencies.

Regulating crypto exchanges is a key aspect of Hong Kong’s overall strategy for web3, a strategy that was initially outlined in 2022. According to Bloomberg, this strategy is part of a larger plan to reestablish Hong Kong as a global financial center, following a period of political unrest. However, Bloomberg points out that the conservative approach adopted by authorities has yet to draw substantial numbers of professionals or investments.

Beyond regulatory hurdles, Bloomberg reports a significant controversy surrounding JPEX, an unauthorized cryptocurrency platform. This platform’s actions led to 2,636 individuals collectively losing HK$1.6 billion ($205 million). This incident has prompted Hong Kong authorities to prioritize investor protection, as reported by Bloomberg.

Exchanges being monitored by SFC can’t accept new customers until they acquire complete licenses. If these exchanges don’t meet the necessary conditions, Bloomberg suggests they might have to start the license application process all over again. Moreover, Bloomberg hints that full licenses will be granted to compliant firms by the end of 2024.

At present, only OSL and HashKey are the cryptocurrency platforms that have completed the licensing procedure in Hong Kong. It’s worth noting that 12 other companies, such as Huobi HK and OKX, have decided to halt their application process for licensing.

Read More

2024-08-22 19:06