As the deadline looms for cryptocurrency exchanges in Hong Kong to obtain the necessary licensing, the industry is under intense scrutiny following a series of scandals and regulatory actions.
Licensing deadline nears
Crypto exchanges operating in the Special Administrative Region must apply for a Virtual Asset Trading Platform (VATP) license from the Securities & Futures Commission (SFC) by February 29. Failure to comply will result in either liquidation or forced exit from the region within three months.
As of February 26, only 18 of numerous exchanges have submitted applications for registration with the SFC. Notable applicants include OKX, Bybit, Crypto.com, and HKVAX, which are associated with Binance. However, some exchanges, such as Huobi HK, have withdrawn their applications for undisclosed reasons.
Regulatory landscape
Upon obtaining the VATP license, exchanges can onboard retail investors for trading Bitcoin (BTC) and Ether (ETH). Additionally, the SFC is reviewing various altcoins and stablecoins for potential trading approval.
Currently, only OSL and HashKey have secured their Hong Kong VATP licenses. Exchanges failing to comply with the licensing requirements must cease operations by May 31. Those whose applications are rejected by the SFC must exit the city within three months.
Persistent challenges
Despite regulatory efforts, unauthorized crypto exchanges remain a significant challenge in Hong Kong. Last year, the collapse of JPEX and Hounax, two major exchanges, rocked the industry with allegations of Ponzi scheme operations. Investors suffered substantial losses, with millions of dollars unaccounted for.
The recent case involving BitForex further highlights the precarious nature of the crypto landscape in Hong Kong. The exchange halted user redemptions and withdrew $56 million from its hot wallets, prompting an investigation. BitForex’s failure to respond to user inquiries adds to the growing concerns surrounding transparency and accountability within the industry.
