Who are the licensed exchanges in Hong Kong?
In recent years, Hong Kong has begun regulating cryptocurrencies. Starting from June 1, 2024, all virtual asset exchanges operating in Hong Kong must be licensed by the Securities and Futures Commission (SFC) under the Anti-Money Laundering Ordinance. Failure to obtain a license will result in criminal liability for the trading platform, and the SFC will take enforcement actions. However, currently, only two platforms have been licensed by the SFC, including OSL Exchange (OSL Digital Securities Limited) and HashKey Exchange, while several platforms, including OKX, have withdrawn their license applications.
According to the latest announcement by the SFC, the only exchanges that have been formally licensed are OSL Exchange and HashKey Exchange, with 11 other exchanges listed as “pending confirmation.”
HashKey Exchange is the first licensed trading platform in Hong Kong that caters to retail investors. Earlier this year, it successfully raised nearly $100 million in Series A financing, officially becoming a cryptocurrency “unicorn.” On the other hand, OSL Exchange is a Hong Kong-based fintech company, and its senior executives come from well-known financial giants such as HSBC and Morgan Stanley.
Surprisingly, there are as many as 12 exchanges that have either failed to meet the requirements or withdrawn their license applications, including OKX and Bybit. Notably, major global exchanges such as Binance and Coinbase are also absent from the list of applicants.
Why do exchanges choose to withdraw their applications?
This year, Hong Kong has actively embraced the cryptocurrency industry, attracting numerous startups and companies to establish a presence in the city, bringing in a wealth of talent and opportunities. Hong Kong has also begun to focus on regulatory measures for the cryptocurrency industry, providing a legal framework for cryptocurrency startups to conduct their business.
The licensing regime was expected to make Hong Kong a leading Web3 hub in Asia, generating high expectations from exchanges and investors alike. So why did so many exchanges ultimately choose to withdraw or not apply?
Lu Zi Jian, Chief Operating Officer of BingX Asia Pacific, recently stated in a Facebook post that it is not surprising to see many exchanges withdraw their applications because the current environment is not very friendly towards exchanges.
Hong Kong only accepts support for 20 cryptocurrencies and allows fiat currencies USD and HKD. The stablecoin USDT can only be traded against Bitcoin (BTC) and Ethereum (ETH). Lu Zi Jian mentioned that the daily trading volume in Hong Kong is only around $10 million. Coupled with these restrictive conditions, the compliance costs for exchanges far exceed the trading volume that a license could bring.
According to FT Chinese, Livio Weng, CEO of HashKey Exchange, stated that the cost of applying for a license in Hong Kong is at least several tens of millions of Hong Kong dollars, and for an already operational platform like HashKey, the investment amounts to several tens of millions of US dollars.
Although the SFC may not have enough manpower to conduct comprehensive reviews of all Web3 institutions, Weng believes that the current situation at least shows a clear development path for Hong Kong, which is much better than the previous “trial and error” phase.
Reference:
Securities and Futures Commission