Hong Kong SFC to Conduct On-Site Inspections of Crypto Platforms after Licensing Deadline

05/29/2024 16:54
Hong Kong SFC to Conduct On-Site Inspections of Crypto Platforms after Licensing Deadline

Hong Kong will conduct on-site inspections of local crypto firms that have not yet completed their applications after the licensing deadline.

Ruholamin Haqshanas

Last updated: | 2 min read

Hong Kong SFC to Conduct On-Site Inspections of Crypto Platforms

The Hong Kong Securities and Futures Commission (SFC) has announced that it will be conducting on-site inspections of local virtual asset trading platforms (VATPs) that have not yet completed their regulatory applications after the licensing deadline of June 1.

The SFC’s move comes as a reminder to crypto companies of their obligation to obtain licensing before the deadline, according to an official announcement.

After June 1, all local crypto trading platforms in Hong Kong must be licensed or “deemed-to-be-licensed” by the SFC.

Those who fall under the “deemed-to-be-licensed” category will operate under a short-term framework designed for crypto firms that were already operating in the region before the licensing regime was implemented.

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 stated that it would conduct on-site inspections in the coming months to ensure compliance with its regulatory requirements, with a particular focus on client asset safeguarding and Know Your Customer (KYC) processes.

The SFC strongly advised investors to only trade cryptocurrencies on platforms that are licensed by the commission.

It also warned companies seeking licenses not to actively market services or onboard new retail clients until they have obtained formal licensing.

Additionally, they 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 OKX and Huobi’s local arm, withdrew their applications prior to the deadline, leaving 18 applications still awaiting approval.

One such crypto exchange, Gate.HK, halted all activities related to acquiring new users and marketing, blocked existing users from making deposits, and commenced delisting tokens on May 23.

The exchange intends 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, marking potential competition for the 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.

Bloomberg Intelligence’s Rebecca Sin estimates that Bitcoin and Ether funds in Hong Kong could amass around $1 billion over the next two years.

Likewise, the CEO of CF Benchmarks, a subsidiary of cryptocurrency exchange Kraken, predicts that Hong Kong crypto ETFs will overcome their lackluster start and accumulate over $1 billion in assets by the end of 2024.

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