The Hong Kong Securities and Futures Commission (SFC) has announced it will conduct on-site inspections of local virtual asset trading platforms (VATPs) that have not completed their regulatory applications following the June 1 licensing deadline.
This initiative serves as a reminder to crypto companies of their obligation to obtain licensing before the deadline, as highlighted in an official announcement.
After June 1, all crypto trading platforms operating in Hong Kong must be licensed or “deemed-to-be-licensed” by the SFC. Those in the “deemed-to-be-licensed” category will operate under a temporary framework designed for firms already active in the region before the new licensing regime was established.
Unlicensed Crypto Firms in Hong Kong to Face Criminal Charges
Operating an unlicensed VATP in Hong Kong after the deadline will be considered a criminal offense, prompting the SFC to take action. The commission plans to conduct on-site inspections in the coming months to ensure compliance with regulatory requirements, with a focus on client asset safeguarding and Know Your Customer (KYC) processes.
The SFC has strongly advised investors to trade only on platforms licensed by the commission. It also warned companies seeking licenses not to market services or onboard new retail clients until they have obtained formal licensing. Furthermore, these firms were urged to prevent mainland Chinese residents from accessing their services.
In the lead-up to the licensing deadline, the number of crypto exchanges and companies seeking operational licenses in Hong Kong has steadily decreased. Eleven crypto firms, including the local arm of OKX and Huobi, withdrew their applications before the deadline, leaving 18 applications still awaiting approval.
One such exchange, Gate.HK, halted activities related to acquiring new users and marketing, blocked existing users from making deposits, and began delisting tokens on May 23. The exchange plans to relaunch its services after restructuring its platform to comply with Hong Kong’s regulatory requirements.
As of now, only two companies, OSL Digital Securities Limited and Hash Blockchain Limited, have been granted licenses to operate in Hong Kong, according to the SFC.
Hong Kong Crypto ETFs Launch
Hong Kong has launched its first batch of ETFs focused on cryptocurrencies, potentially competing with popular Bitcoin products in the United States. Harvest Global Investments Ltd., the local unit of China Asset Management, along with a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., listed Bitcoin and Ether ETFs in the city on Tuesday.
Rebecca Sin of Bloomberg Intelligence estimates that Bitcoin and Ether funds in Hong Kong could amass around $1 billion over the next two years. Similarly, the CEO of CF Benchmarks, a subsidiary of cryptocurrency exchange Kraken, predicts that Hong Kong crypto ETFs will overcome their slow start and accumulate over $1 billion in assets by the end of 2024.