Hong Kong’s Crypto Licensing Attracts Fewer Applicants Than Anticipated

March 5, 2024

By Sharan Kaur Phillora

Hong Kong’s recent push to establish itself as a global crypto hub through a new licensing scheme for virtual asset trading platforms (VATPs) has seen a lukewarm response, with only 24 applicants as of the day after the February 29 deadline.

Here’s what we know:

This figure pales in comparison to Singapore’s similar initiative a few years ago, which attracted triple the number of applicants. The last-minute rush saw at least five crypto firms submitting applications in the final 10 days, a critical move to continue their operations in the city. With the deadline now passed, unlicensed cryptocurrency exchanges operating or marketing in Hong Kong are required to cease their activities by May 31.

Notably, all major crypto exchanges with ties to mainland China or Hong Kong, including industry giants like HBGL Hong Kong and affiliates of Binance and OKX, have applied for licenses, either directly or through affiliates. Despite this, the overall interest has been significantly lower than expected, especially when contrasted with Singapore’s robust response to a similar regulatory framework.

Tony Tong, co-founder and co-chairman of the Hong Kong Blockchain Association, expressed his views on the stringent regulations by the Securities and Futures Commission (SFC), highlighting the high costs associated with the application process. The comprehensive procedure, including external assessors and hiring a local responsible officer (RO), could amount to upwards of HK$60 million (US$7.7 million).

Former Monetary Authority of Singapore regulator and current senior policy adviser at TRM Labs, Angela Ang, pointed out the unique challenges posed by Hong Kong’s regulatory requirements, such as the external assessor mandate and the high degree of personal liability for ROs. These factors likely contributed to the lower number of applications.

The recent increase in enforcement actions, particularly in the wake of the JPEX scandal, and the proposed regulations on over-the-counter (OTC) trading services further underscore the government’s commitment to a tightly regulated crypto environment.

As Hong Kong continues to refine its regulatory framework to foster a safe and competitive crypto ecosystem, the global crypto community watches closely to see if the city can strike the right balance between innovation and investor protection and how it will fare against other financial hubs like Singapore in attracting crypto businesses.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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