Hong Kong SFC Shuts Down All Unlicensed Cryptocurrency Exchanges

Hong Kong’s Securities and Futures Commission (SFC) has taken a significant step in regulating the cryptocurrency market by requiring all unlicensed virtual asset trading platforms (VATPs) to cease operations in the city. This move, effective June 1, 2024, aims to reduce investor risk and ensure that only licensed or “deemed-to-be-licensed” VATP applicants under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) can operate in Hong Kong.

The SFC issued an ultimatum to crypto exchanges on February 29, 2024, giving them three months to either file for a license or shut down operations. As the deadline approached, several exchanges, including global giants like OKX and Huobi HK, withdrew from the Hong Kong market. In total, six exchanges opted out in May alone. This exodus highlights the stringent requirements set by the SFC, which many exchanges were unable or unwilling to meet.

Despite the withdrawals, some exchanges, such as Gate.HK, are actively working to restructure their platforms to comply with Hong Kong’s regulatory standards. Gate.HK plans to resume operations in Hong Kong after obtaining the necessary licenses, contributing to the virtual asset ecosystem.

As of May 31, 2024, 18 crypto exchanges have submitted license applications to operate in Hong Kong. The SFC is expected to publish the list of approved exchanges by June 1, 2024. The exacting requests from the SFC, including restrictions on serving mainland Chinese investors, have been cited as significant factors in the withdrawals. This restriction is particularly noteworthy, given the ongoing Bitcoin ban in mainland China and the reliance of many offshore exchanges on Chinese crypto investors who have found workarounds.

Hong Kong’s regulatory environment is seen as crucial for the development of Web3 and Mainland China’s digital economy. Professor Chen Chun of the Chinese Academy of Engineering emphasized the need for Hong Kong to leverage the technical characteristics of Web 3.0, create clear space boundaries, and increase productivity development while progressing in risk prevention. He also suggested that Hong Kong regulators aim for an initial money supply of $26 million to $260 million for their central bank digital currency.

In a recent development, the SFC received a new license application from a platform named Bitcoinworld, which has been accused of exploiting HTX’s logo as its own. HTX has clarified that it is neither a subsidiary nor a related company to Bitcoinworld.

The SFC’s strict stance on unlicensed exchanges underscores Hong Kong’s commitment to creating a secure and regulated environment for cryptocurrency trading. As the city continues to evolve as a “sandbox” for Web3 development, the impact of these regulations on the global cryptocurrency market will be closely watched.

Leave a comment

My Newsletter

Sign Up For Updates & Newsletters