Hong Kong’s securities regulator said 11 cryptocurrency exchanges are a step closer to obtaining licences, one year after rolling out a digital-asset rulebook to try and foster a hub for the industry.
Applicants including Crypto.com and Bullish are “deemed to be licenced”, the Securities & Futures Commission’s (SFC’s) website showed on Saturday (Jun 1). Those venues are among platforms on the list with notable trading volumes globally.
Prominent digital-asset outfits such as OKX and Bybit, which regularly command big chunks of activity, withdrew bids for permits. Binance Holdings, the world’s largest exchange, didn’t apply, nor did the top US platform Coinbase Global or Kraken, another popular venue.
Hong Kong set a Jun 1 deadline for crypto exchanges to be either licenced or deemed to be so. Firms at a minimum must fall in the latter category to operate in the city and market services to local investors, and will receive actual permits once the SFC is satisfied about consistent compliance.
Hub ambition
Officials pivoted towards fostering a virtual-asset hub in late 2022, part of an effort to repair Hong Kong’s image as a financial centre after a crackdown on dissent sent a chill through global companies as well as expatriate staff.
The crypto initiatives include expanding the roster of permitted exchanges, the launch of spot-Bitcoin and Ether exchange-traded funds, a planned framework for stablecoins and digital bond issuance on tokenization platforms.
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Hong Kong is vying with the likes of Dubai and Singapore to be a digital-asset centre and whether the city will succeed is an open question. Its strict rules buttress investor protection and seek to prevent money laundering and terrorism financing, imposing compliance costs and reporting requirements.
About two dozen companies applied for licences to operate crypto exchanges by a Feb 29 deadline. There are currently two fully licenced digital-asset exchanges in Hong Kong, HashKey Exchange and OSL Group.
Wealth gateway
In traditional markets, Hong Kong provides a gateway to tap wealth from mainland China. But Beijing has banned digital-asset trading and mainland investors lack ready access to Hong Kong’s crypto exchanges and ETFs.
Chinese citizens are suspected of flouting the crypto ban, whether in search of alternative investments amid falling home prices or to skirt overseas transfer limits. Bitcoin’s four-fold jump since the start of 2023 has stoked demand.
The crypto exchange industry has a chequered record of operating in the gray zone, or worse. In the US, the collapse of FTX was one of the biggest frauds in US history. Binance in November pleaded guilty to violations of US anti-money-laundering and sanctions laws and was hit with a landmark US$4.3 billion penalty.
An alleged fraud at the JPEX crypto exchange roiled Hong Kong last year. Officials face an uphill task to regulate trading, since users can tap virtual-private networks to mask locations or swap crypto in peer-to-peer deals. BLOOMBERG
