Hong Kong watchdog to crypto exchanges: Get a license or shut down

Hong Kong watchdog to crypto exchanges: Get a license or shut down
The Securities and Futures Commission has told crypto exchanges to apply for a license or shut down their Hong Kong operations. Credit: Shutterstock / ESB Professional
  • Exchanges that don’t submit a licence application by February 29 must stop operating in Hong Kong by the end of May
  • The SFC has warned investors to take money off platforms that have not applied.
  • At least 14 firms are currently seeking a licence.

Apply or shut down.

That’s the stern warning Hong Kong’s securities watchdog has levied against the city’s crypto exchanges.

The Securities and Futures Commission slammed Hong Kong’s crypto ecosystem with the caution on February 5.

The regulator said that unless exchanges have applied for a virtual asset trading platform licence by February 29, then they’ll be forced to shut down by May 31.

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The warning came even as Hong Kong is endeavouring to establish itself as a crypto hub with efforts like tokenising government bonds and fighting crypto scams.

The SFC has pledged to improve public awareness of crypto and investment scams to “keep investors out of harm’s way,” as SFC Chief Executive Officer Julia Leung said in a recent statement.

‘Harm’s way’

Fourteen firms have applied for licensing in the city to date following the launch of Hong Kong’s new crypto regulatory regime. Exchanges are able to continue to operate while they await a decision.

To date, only two — OSL and HashKey Exchange — have received approval to offer services to retail investors.

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The SFC further warned investors to keep checking if the platforms they use have applied for a VATP licence.

“For investors dealing with VATPs operating in Hong Kong which are not on the [application list], they are urged to make preparations early, before 31 May 2024, such as by closing their accounts with these VATPs or transferring to SFC-licensed VATPs for trading virtual assets,” the SFC said.

It cautioned that applications already submitted are still being processed. The regulator noted that using crypto exchanges that have yet to be approved carries a risk as an application does not guarantee approval.

“The SFC strongly urges investors to trade virtual assets only on SFC-licensed VATPs because they may leave themselves unprotected by trading on unlicensed platforms,” the SFC said.

The warning comes amid ongoing investigations into several platforms in Hong Kong. Most notable among them is crypto exchange JPEX, which has been subject to an investigation since March.

As of January, 69 people have been arrested in connection with the exchange but no charges have been brought, according to the Hong Kong Police Force. The investigation into the exchange remains ongoing.

In addition to JPEX, 12 additional platforms have also been listed as “suspicious” on the SFC’s website.

Got a story about crypto and blockchain in Asia? Contact me at callan@dlnews.com.