Hong Kong’s ambitions to become a crypto hub are facing challenges. Over a dozen exchanges grapple with regulatory concerns, making it difficult to secure full licenses.
According to a Bloomberg report citing insiders, cryptocurrency exchanges in Hong Kong are having difficulties obtaining full licences despite the city’s efforts to establish itself as a crypto hub.
Bloomberg noted that Hong Kong’s Securities and Futures Commission has reportedly uncovered concerning practices during on-site inspections of 11 “deemed-to-be-licensed” exchanges, casting doubt on their readiness to meet complete licensing standards.
According to the report, the investigation found that some exchanges were overly dependent on a limited number of executives to oversee client asset custody, while others failed to adequately safeguard against cybercrime risks.The exchanges facing scrutiny reportedly include significant players like Crypto.com and Bullish, along with local trading platforms such as HKbitEX and PantherTrade.
These findings come as the regulator ramps up efforts to enforce strict compliance among crypto platforms, emphasizing the protection of client assets and the implementation of stringent know-your-client protocols.
Only two platforms — OSL and HashKey — hold full licenses in Hong Kong. While the SFC aims to grant more permits by the end of 2024, the process has already resulted in the withdrawal of 12 applications, including those from Bybit, Huobi HK, and OKX.
Meanwhile, Hong Kong’s government released a public consultation document in February proposing stricter regulations on over-the-counter (OTC) cryptocurrency trades. These regulations aligned with the nation’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which had been in effect since June 2023.
The proposed regulations aimed to limit OTC trades to spot transactions of digital assets for fiat currency. Digital asset trading would be governed under the standard Virtual Asset Trading Provider (VATP) licence. Additionally, peer-to-peer (P2P) trading would be classified separately from OTC.
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