Hong Kong’s Securities and Futures Commission (SFC) has declared that it will carry out on-site inspections of local virtual asset trading platforms (VATPs) that have not completed their regulatory applications by the June 1 deadline for licensing. The SFC’s decision serves as a reminder to crypto companies about the importance of obtaining licensing before the deadline. After June 1, all local crypto trading platforms in Hong Kong must be licensed or “deemed-to-be-licensed” by the SFC. Any unlicensed VATP operating in Hong Kong after the deadline will face criminal charges. The SFC plans to conduct on-site inspections in the coming months to ensure compliance with its regulatory requirements, with a particular focus on safeguarding client assets and implementing Know Your Customer (KYC) processes. The SFC strongly advises investors to only trade cryptocurrencies on platforms licensed by the commission and warns companies seeking licenses not to actively market services or onboard new retail clients until they have obtained formal licensing. The SFC also urges them to prevent mainland Chinese residents from accessing their services. Prior to the licensing deadline, the number of crypto exchanges and companies seeking operational licenses in Hong Kong has declined. Eleven crypto firms, including OKX and Huobi’s local arm, withdrew their applications before the deadline, leaving 18 applications still pending approval. Gate.HK, a crypto exchange, suspended all activities related to acquiring new users and marketing, blocked existing users from making deposits, and began delisting tokens on May 23. The exchange plans to relaunch its services after restructuring its platform to comply with Hong Kong’s regulatory requirements. Currently, only two companies, OSL Digital Securities Limited and Hash Blockchain Limited, have been granted licenses to operate in Hong Kong, according to the SFC. In other news, Hong Kong has introduced its first batch of cryptocurrency-focused ETFs, which could potentially compete with popular Bitcoin products in the United States. Harvest Global Investments Ltd., the local unit of China Asset Management, and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., have listed Bitcoin and Ether ETFs in the city. Bloomberg Intelligence estimates that Bitcoin and Ether funds in Hong Kong could accumulate around $1 billion over the next two years. Similarly, the CEO of CF Benchmarks, a subsidiary of cryptocurrency exchange Kraken, predicts that Hong Kong crypto ETFs will surpass their lackluster start and accumulate over $1 billion in assets by the end of 2024.
