Tech
Hong Kong cryptocurrency exchange license applicants with ties to mainland China withdraw from the city
Stringent regulatory requirements and an inability to serve mainland investors are pushing global cryptocurrency exchanges out of Hong Kong, with several large firms withdrawing their license applications a year after rushing to set up shop ahead of the new regulations intended to transform the city into a virtual resource centre.
Local affiliates of major mainland China-linked cryptocurrency exchanges – including OKX, Gate.io, KuCoin, Binance and HTX, formerly Huobi – have all withdrawn their applications for a virtual asset trading platform (VATP) license in Hong Kong which had been filed over in recent months, according to the Securities and Futures Commission (SFC) website.
These companies, which started in China but now have sprawling operations globally, are among the largest cryptocurrency players to have shown interest in Hong Kong’s new virtual asset regulatory regime, which began last June, which requires that exchanges are authorized in the city. Those with a pre-existing presence were given a one-year grace period, but those who withdrew their applications must now close their operations in Hong Kong.
SFC’s demanding demands appear to have contributed to the dropouts, which now include seven of them 24 original candidates. However, the inability to serve mainland customers may have been another important factor.
In a notice reminding exchange operators that they must be “deemed to be licensed” by June 1 to continue operating in Hong Kong, the SFC said VAPs must “comply with all applicable laws and regulations, including… preventing residents mainland China to access any of their virtual asset services.”
The rule covering Chinese investors was included in a list of requirements issued directly to applicants, dampening enthusiasm for operating in Hong Kong, according to an industry insider familiar with the matter, who wished to remain anonymous because the discussions were private .
Other license applicants may have been directly instructed by the SFC to withdraw, said Angela Ang, senior policy advisor at blockchain research firm TRM Labs.
“Companies don’t invest time and money in a licensing process only to then back out,” Ang said. “For those already operating, the stakes are particularly high, as withdrawal means they must close.”
“They will usually only withdraw if it is clear that they will not meet the requirements for approval, perhaps as clear as it is said directly by the regulator,” he added.
The SFC declined to comment on the withdrawals.
Some of the exchanges that have pulled out include local operations affiliated with foreign crypto firms, including HKVAEX, an affiliate of BinanceAND Huobi Hong Kong, which uses the former name of HTX. Both Binance and HTX have stated that these exchanges operate independently.
Only HashKey Exchange and OSL have been approved to serve retail investors in Hong Kong. There are now 18 VATP claimants remaining on the SFC’s official list, with Crypto.com, Bullish and Bybit, another mainland-based exchange, among the largest.
This month, the SFC identified a new license applicant for a platform called bitcoinworld, which used the HTX logo as its own according to Google search results and the website’s source code. HTX said the company is neither a “subsidiary nor an affiliated company.”
“We will investigate the matter and reserve our legal right [to take action] for improper use of the HTX logo,” a company representative said.
With a deadline looming for a decision on who can continue to operate exchanges in the city, the number of remaining applicants is being interpreted by some as a demonstration of Hong Kong’s progress in becoming a virtual asset hub.
“These withdrawals should be seen as a barometer of the SFC’s regulatory expectations and the type of crypto hub they want to be,” Ang said.
Additional reporting by Matt Haldane.