Hong Kong Grants Licences to Four New Crypto Exchanges

Aiming to become a crypto hub in the region amid growing competition, the Hong Kong Securities and Futures Commission (SFC) has approved licenses to four more crypto exchanges as the region focuses on accelerating the licensing process.

This decision was taken amidst a surge in the price of bitcoin and after the SFC completed risk-based on-site inspections on all deemed applicants following the introduction of its inspection programme in June this year.

The four new additional exchanges are HKbitEX, Accumulus, DFX Labs, and EX.IO that received SFC nod under its swift licensing process after the applicants addressed feedback from the regulator’s on-site inspections. The SFC has previously issued three such licenses to OSL, HashKey and HKVAX.

Hong Kong, which has opened its doors to crypto firms in June 2023, officially launched a crypto licensing regime for “virtual asset trading platforms” (VATPs), allowing licensed exchanges to offer retail trading services.

Eric Yip, the SFC’s Executive Director of Intermediaries, said that the SFC has worked to speed up the licensing process and have been proactively engaging with VATPs’ senior management and ultimate controllers, which helped drive home its expected regulatory standards and expedite the licensing process for VATPs.

In a separate circular, the SFC provided more details on a revamped licensing process. In addition to on-site inspections, the regulator requires applicants to undergo assessments of their platform policies, procedures, systems and controls, which a certified public accountant must sign off.

“The SFC will supervise the whole second-phase assessment process through a tripartite engagement with the VATPs and their external assessors and will uplift the restriction on business scope after the second-phase assessment is completed to the SFC’s satisfaction,” the Commission said.

Joseph Chan, Acting Secretary for Financial Services and the Treasury recently said that the SFC also plans to establish a “consultative panel” that is expected to commence early next year for licensed crypto trading platforms.

Dozen More Applications Pending

According to Hong Kong-based English daily South China Morning Post, the four new licensees were among the nearly 30 companies pursuing the licence this year, but only about a dozen remain applicants after a number of large platforms, including OKX and HTX, withdrew their applications earlier this year under stringent regulatory requirements.

Thousand Whales Technology, which operates the crypto trading platform EX.IO, is backed by Valuable Capital Group, a brokerage under Sina Corporation, the operator of Weibo, one of China’s largest social media platforms.

The Hong Kong government’s efforts to regulate the volatile crypto sector has been met with mixed reactions from the industry.

While the city’s move in April to allow crypto exchange-traded funds (ETF) was hailed as a major milestone, as it pre-empted the US in launching ETFs that invest directly in ether, the US quickly allowed for similar products, which dwarfed Hong Kong’s in size and scale.