Crypto exchanges are leaving Hong Kong. Will this undermine the area’s aspirations to turn into a world crypto hub?
Hong Kong authorities mentioned that each one cryptocurrency exchanges that haven’t utilized for an working license with the Securities and Futures Fee (SFC) of Hong Kong are required by legislation to stop working within the area instantly.
Thus, at first of the 12 months, the SFC explicitly requested cryptocurrency exchanges to both submit an utility for a license by Feb. 29 or cease working within the area inside three months.
At the least 22 crypto exchanges utilized for licenses required to function in Hong Kong on the time specified by the SFC. Nonetheless, a few of them withdrew their purposes shortly earlier than the deadline.
Thus, journalist Colin Wu writes that final month, six international platforms, together with OKX, Gate.HK and Huobi HK left the Hong Kong market. Furthermore, a lot of them wanted to point the explanations for his or her surprising resolution. Solely Gate.HK cited the necessity for an “overhaul” of its buying and selling platform earlier than it may adjust to Hong Kong regulatory necessities.
“Many industry insiders are worried that the new licensing system will turn into a replica of the “food truck incident” and even turn into a case of the federal government’s promotion of digital banks, with a lot ado about nothing.”
Colin Wu, blockchain journalist
Obligatory license
Efficient June 1, digital asset buying and selling platforms (VATPs) working in Hong Kong have to be licensed below the Anti-Cash Laundering and Anti-Terrorism Financing Order (AMLO) to be authorized.
This regulatory change requires VATPs to be licensed by the Monetary Companies Council or to qualify as candidates “deemed to be licensed.” Appearing with out following the principles is a felony offense, and strict motion has been promised in opposition to violations.
“This list sets out the names of virtual asset trading platform operator applicants (VATP applicants) whose licence applications have yet to be approved by the SFC [Note 1] and includes those which are deemed-to-be-licensed VATP applicants as of 1 June 2024.”
SFC assertion
Failure to adjust to SFC requirements will end result within the license being refused, and platforms could also be pressured to stop operations in Hong Kong. The SFC emphasizes the momentary nature of the situations, that are meant to encourage market improvement and guarantee investor security.
Who can get a license?
In response to Bloomberg, in early June, the SFC introduced that some cryptocurrency exchanges have been one step nearer to acquiring licenses.
The overall variety of candidates consists of corporations akin to HKbitEX, VDX, HKVAX, PantherTrade, Accumulus, DFX Labs, Bixin.com, xWhale, bitV, YAX, Bullish, Crypto.com, WhaleFin, Matrixport HK, HKX, and bitcoinworld.
On the similar time, giant platforms like OKX have withdrawn allow purposes. Binance, the world’s largest alternate, didn’t apply, as did Coinbase and Kraken.
Prohibition on servicing purchasers from China
Hong Kong has been designated as a Particular Administrative Area of China below the precept of “one country, two systems” since July 1997. On the similar time, the perspective of the 2 areas in direction of cryptocurrencies is basically totally different.
China has strictly banned cryptocurrency buying and selling since September 2021, however curiosity in Bitcoin (BTC) is rising. Regardless of the ban, the underground cryptocurrency market in China nonetheless has large buying and selling volumes. Hong Kong is open to digital property and faces an financial slowdown that’s pushing buyers towards digital property.
Colin Wu revealed some particulars of acquiring official permission. A number of candidates instructed him that the SFC required license candidates to ensure that the exchanges wouldn’t serve customers from mainland China in any world area.
The supply claims that this situation might be the explanation some cryptocurrency exchanges have left Hong Kong.
Hong Kong heads to web3
In contrast to mainland China, Hong Kong has been actively growing blockchain in the previous couple of years.
In October 2022, the federal government introduced the legalization of retail transactions with cryptocurrency. At the start of December 2022, the Legislative Council of Hong Kong adopted laws that launched the idea of digital property and established obligatory licensing of crypto service suppliers from June 1, 2023.
In April, six Bitcoin and Ethereum (ETH) spot ETFs have been launched for buying and selling in Hong Kong. 4 corporations acquired approval to launch the brand new software: China Asset Administration, Harvest World Investments, Bosera, and HashKey.
Along with Hong Kong residents, worldwide buyers who meet all native requirements may even have entry to the brand new ETFs. Particularly, they have to undergo the Know Your Buyer (KYC) process. This inclusive strategy may broaden the shopper base and enhance the liquidity and stability of the Hong Kong ETF market.
Will the brand new guidelines destroy Hong Kong’s efforts?
Hong Kong’s strategy emphasizes investor safety and anti-money laundering measures, which may discourage these demanding stricter compliance situations. Nonetheless, regardless of a ban on crypto buying and selling there, town affords a possible window to mainland China’s wealth.
Regulators are working a number of pilot tasks to evaluate cryptos’ potential advantages and discover associated purposes. As well as, Hong Kong has regularly confirmed its pro-cryptographic place, changing into essentially the most crypto-ready nation.
A method or one other, with obligatory licensing of crypto exchanges, Hong Kong will additional strengthen its place because the world’s main cryptocurrency hub.