Hong Kong’s Securities & Futures Commission (SFC) has mandated the departure of all unlicensed virtual asset trading platforms (VATPs) from the city effective tomorrow, June 1, 2024. The SFC asserts that all VATPs operating in Hong Kong must either obtain a license from the SFC or be considered as “deemed-to-be-licensed” VATP applicants under the AMLO.
In a move to reduce investor risk, Hong Kong regulators issued a clear ultimatum to crypto exchanges on February 29: either apply for a license by that date or cease operations within three months. That deadline has now arrived.
To comply with legal requirements, all crypto exchanges in the region must cease operations immediately for failing to apply for an operational license from Hong Kong’s Securities and Futures Commission.
During the application period, 22 crypto exchanges submitted license applications to remain in the region. However, many of these exchanges ultimately decided to withdraw their applications before the deadline.
In the month of May alone, six crypto exchanges, including industry giants OKX and Huobi HK, withdrew from the Hong Kong market. In contrast, Gate.HK, a Hong Kong-based exchange, cited the unexpected development as a reason for restructuring its trading platform to meet Hong Kong’s regulatory standards.
Chun, a professor at the state-affiliated Chinese Academy of Engineering, described Hong Kong as a “sandbox” for developing Web3 and Mainland China’s digital economy. He emphasized the need for a digital currency that can navigate the complexities of the Web3 network and suggested that Hong Kong regulators consider an initial money supply of $26 million to $260 million for their central bank digital currency.
As of May 31, 2024, 18 crypto exchanges have submitted license applications to operate in Hong Kong. The SFC plans to release a list of approved exchanges by June 1.
The stringent requirements imposed by the SFC have led to the withdrawal of seven out of the original 24 applications, with exchanges with ties to Mainland China being particularly affected. Restrictions on serving mainland customers were a contributing factor, as mainland investors were not allowed access to these platforms.
Despite the ongoing Bitcoin ban in China, Hong Kong is seen as a hub for developing Web3 and China’s digital economy. While the People’s Bank of China has prohibited providing Bitcoin services to mainland citizens, many offshore exchanges still rely on Chinese crypto investors who have found ways to circumvent these restrictions.