On June 1, Hong Kong’s Securities and Futures Commission (SFC) unveiled a list of cryptocurrency exchange platforms with licenses nearing approval.
According to the SFC website, 11 applicants, including Matrixport HK, Accumulus, Crypto.com, and Bullish, are “deemed to be licensed.” Other platforms on the list are HKbitEX, PantherTrade, DFX Labs, Bixincom, xWhale, YAX, and WhaleFin.
Hong Kong’s Stringent Requirement Dissuades Top Exchanges
If approved, these firms will bring the number of licensed exchanges in Hong Kong to 13. Currently, only OSL Exchange and HashKey hold licenses granted before the new regulations took effect in June 2023.
However, the SFC clarified that these “deemed to be licensed” exchanges are not yet formally licensed. Additionally, it advised investors to be cautious when trading on these platforms, as they may not receive a license and might have to cease operations in Hong Kong.
Over the past year, Hong Kong has aimed to become a digital asset hub. However, its strict rules, while designed to protect investors and prevent money laundering and terrorism financing, have created significant barriers for many exchanges. Reports indicate that the SFC instructed its exchange license applicants to ensure they do not make their products available to mainland Chinese users, even though China has banned crypto.
These stringent requirements have led major exchanges like OKX, Gate.io, KuCoin, Binance, and HTX (formerly Huobi) to withdraw their applications for a virtual asset trading platform (VATP) license in Hong Kong.
Read more: 11 Best Crypto Exchanges and Apps for Beginners in 2024
Notably, these platforms’ withdrawals have drawn scrutiny to SFC’s application process handling. Hong Kong legislator David Chiu questioned whether the city can truly become a hub for financial innovation given the many restrictions imposed at this early stage.
“Many industry insiders are worried that the new licensing system will turn into a replica of the ‘food truck incident’ or even become a case of the government’s promotion of virtual banks, with much ado about nothing. They are worried that the authorities will repeat the same mistakes and that even if operators are granted licenses, it will be difficult for them to develop a profit model,” Chiu reportedly said.
Read more: Crypto Regulation: What Are the Benefits and Drawbacks?
Furthermore, Chiu claimed that the new licensing system shakes market confidence. He pointed out that many approval conditions borrow from traditional finance, which is too strict for Web3. The industry’s response to these challenges will be crucial in shaping the future of cryptocurrency exchanges in the region.
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