TLDR
- Hong Kong’s SFC plans to approve more crypto exchange licenses by year-end
- 11 applicants have undergone on-site reviews
- HKVAX recently received approval, joining HashKey and OSL
- Some international exchanges have withdrawn applications
- SFC is considering licensing for crypto OTC and custody services
Hong Kong is making progress in its efforts to become a cryptocurrency hub, with the city’s financial regulator planning to approve more exchange licenses by the end of the year.
Julia Leung, CEO of the Securities and Futures Commission (SFC), revealed that 11 applicants have already undergone on-site reviews, signaling a step forward in the licensing process.
The announcement comes on the heels of HKVAX receiving regulatory approval last week, making it the third exchange in Hong Kong to secure a license.
HKVAX joins HashKey and OSL in the small group of approved platforms, with plans to launch its operations in the fourth quarter of this year.
Hong Kong’s journey to establish itself as a crypto-friendly jurisdiction has not been without challenges. The regulatory framework, introduced to provide clarity and protection for investors, has faced criticism for being overly strict.
This perception has led some international exchanges to withdraw their applications, potentially hindering the city’s ambitions to attract major players in the cryptocurrency space.
Notable withdrawals include OKX and Bybit, both of which canceled their applications in May without disclosing specific reasons.
Reports suggest that one factor may have been the SFC’s requirement to prevent mainland Chinese residents from accessing their services, highlighting the delicate balance Hong Kong must strike between fostering innovation and adhering to regional regulations.
The stringent approach taken by the SFC has drawn mixed reactions. While some lawmakers argue that the current regulations are too rigid and may stifle growth in the web3 sector, others point to the need for robust oversight in light of recent scandals.
The collapse of JPEX, an unlicensed exchange that left thousands of Hong Kong residents with significant losses, underscores the risks associated with inadequate regulation.
In response to the JPEX incident, which resulted in over 2,600 individuals losing approximately $200 million, the SFC has implemented changes to improve transparency.
These include publishing lists of companies that have applied for licenses and identifying suspicious platforms on its website. The regulator aims to strike a balance between protecting investors and fostering innovation in the cryptocurrency sector.
The SFC’s efforts extend beyond exchange licensing. Leung mentioned that the commission is also exploring the possibility of licensing cryptocurrency over-the-counter (OTC) trading and custody services.
This expansion of regulatory scope demonstrates Hong Kong’s commitment to creating a comprehensive framework for crypto-related activities.
Despite the challenges, Hong Kong continues to attract interest from both local and international players. Bullish, the parent company of CoinDesk, has submitted a license application, while Crypto.com remains on the applicant list, bucking the trend of withdrawals by major exchanges.
As Hong Kong moves forward with its licensing regime, the global crypto community watches closely.
The city’s ability to balance regulatory requirements with the need for innovation will likely determine its success in becoming a leading cryptocurrency hub.
With more approvals expected by year-end, Hong Kong’s crypto landscape is poised for significant developments in the coming months.