Hong Kong regulators say crypto firms lie about submitting licence applications

The SFC warned investors of crypto trading platforms making false claims about submitting licence applications on Monday.
The markets watchdog accused unnamed companies of engaging in improper practices and giving the public a false sense of assurance.
Exchanges will need to apply for licences to continue to serve retail clients.

Some crypto trading platforms have falsely claimed to have submitted licence applications in Hong Kong, the city’s Securities and Futures Commission warned investors on Monday.

Without specifying the companies in question, the SFC said certain virtual asset trading platforms, or VATPs, were engaging in improper practices and giving “the public a false sense of assurance” that they complied with regulatory requirements.

The news came as Hong Kong aims to position itself as an Asian crypto hub, separating itself from Beijing’s hard stance against the industry.

As part of that bid, Hong Kong is currently transitioning to a new regulatory crypto regime, which snapped into place on June 1.

For approval, exchanges must meet minimum requirements concerning onboarding, governance, disclosure, and token admission criteria, as well as anti-money laundering and counter-terrorist financing measures.

Exchanges have been given a grace period to apply for licences during which time they can continue to operate.

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“Anticipating the transitional arrangements, some unlicensed VATPs set up new entities to provide virtual asset services in Hong Kong,” the SFC said.

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“They also publicly announced their intention to apply for licences for these new entities. However, the services and products offered by some of these new entities may not be in compliance with the legal and regulatory requirements under the new regime.”

And such activities will cause the SFC to take a “dim view” of past non-compliant behaviour when it comes to considering licence applications.

“Investors should be aware that these unlicensed VATPs may, or may not, submit a licence application after all. Most VATPs currently accessible by the public are unregulated,” it added.

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According to the SFC’s website, there are only two regulated exchanges in Hong Kong, HashKey Exchange and OSL.

They both received upgrades to their existing licences last week. Others, including OKX and Huobi, have said they plan to apply for licences.

Do you have a tip about Hong Kong’s position as a crypto hub, regulation, or another story? Email me at callan@dlnews.com.