Hong Kong’s crypto ambitions face setbacks as major exchanges withdraw licence applications

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29th May 2024 – (Hong Kong) Several prominent cryptocurrency exchanges have retracted their applications for a virtual asset trading platform (VATP) licence in Hong Kong. This comes as a setback a year after these entities eagerly initiated processes to comply with the city’s new regulatory framework.

The Securities and Futures Commission (SFC) of Hong Kong has noted that local affiliates of major exchanges, including OKX, Gate.io, KuCoin, Binance, and HTX (formerly known as Huobi), have all withdrawn their applications. These firms, originally established in mainland China and now operating globally, were among the foremost to engage with the new regulatory regime introduced last June.

Under the new rules, exchanges needed to secure a licence to continue operations within Hong Kong. A one-year grace period was provided, after which unlicensed operations would need to cease. The SFC’s stringent demands and specific prohibitions against servicing mainland Chinese investors have been cited as key reasons for the withdrawals.

An industry insider, preferring anonymity, highlighted that the SFC’s directives explicitly prevent services to mainland residents—a significant market for these platforms. This restriction, along with the high regulatory standards, has led to a shrinking pool of applicants, with seven of the original 24 candidates bowing out.

While some exchanges like HashKey Exchange and OSL have managed to secure approval for retail operations, the list of remaining applicants has dwindled. Notably, this month welcomed a new applicant, bitcoinworld, amid controversies over the use of HTX’s logo, which HTX has disclaimed any association with.