The final countdown for applications for Hong Kong’s cryptocurrency licenses has begun, and major centralized exchanges have announced their withdrawal from the Hong Kong market.
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Virtual asset trading platform license application
Starting in 2024, the Hong Kong government has implemented strict regulatory measures on the cryptocurrency industry, requiring all centralized exchanges to apply for and obtain a virtual asset trading platform license locally to operate legally. This move aims to build Hong Kong into Asia’s first virtual asset-friendly city while preventing past tragedies of investment losses such as the JEPX exchange incident.
According to the Hong Kong Securities and Futures Commission’s announcement in 2023, cryptocurrency exchanges intending to operate in Hong Kong need to successfully apply for and obtain licenses within a limited time, including Type 1 regulated activities (securities trading) and Type 7 regulated activities. (Providing automated trading services). In the early days, this policy attracted the attention and active participation of world-renowned centralized exchanges including OKX, Bybit, Huobi and Gate.
Major centralized exchanges announced the withdrawal of license applications
However, last month, as many as seven large centralized exchanges suddenly withdrew their license applications and announced that they would stop providing services to users in Hong Kong on May 31. The most eye-catching one is the withdrawal of OKX. OKX not only actively participates in Hong Kong’s Web3 activities, but also serves as the title sponsor of Hong Kong Fintech Week in 2022 to help promote Hong Kong’s Web3 development on the international stage.
In addition to OKX, other major exchanges such as Bybit, Huobi and Gate also announced the withdrawal of license applications. These platforms consistently rank among the top five in terms of trading volume in the global crypto market. Although under strict supervision in Hong Kong, these transactions require “dry and wet separation” of funds into transactions in the Hong Kong market and international markets. If they can successfully obtain a virtual asset trading platform license, their rich experience in the cryptocurrency industry will be of great help to Hong Kong in promoting the development of cryptocurrency.
As for why various exchanges have also withdrawn their applications, industry insiders have analyzed that the main reason why the exchanges withdrew their license applications may be due to high compliance costs, which ultimately forced them to choose to withdraw from the Hong Kong market. Although the actual reason is unknown, Hong Kong’s strict supervision undoubtedly provides more stability and protection to the market, especially for retail investors.
Licensed exchanges
So far, only OSL Exchange and HashKey Exchange have successfully obtained virtual asset trading platform licenses. Among them, HashKey Exchange’s active performance is particularly outstanding. It not only helped organize the 2024 Hong Kong Web3 Carnival, but also launched HashKey Global Exchange and HashKey Capital, actively investing in promoting the development of the Web3 ecosystem. I believe that the HashKey team also has considerable strength and actively participated. Various activities have also made them famous, raising a lot of popularity in Hong Kong and internationally.
Hong Kong’s future development and regulation
In terms of cryptocurrency development, the Acting Financial Secretary of Hong Kong also publicly stated recently that Hong Kong will fully promote financial innovation in key areas including Web3-related DeFi and virtual assets. In addition, Hong Kong Cyberport also announced the establishment of a “Web3.0 Investment Circle” to provide financing assistance to the Web3 community and users. It can be seen that Hong Kong is still keen on the development of Web3 and virtual assets.
In terms of supervision, as many as 17 exchanges are currently in the process of applying for licenses, and the China Securities Regulatory Commission is currently busy processing the applications of each exchange. In addition, the Hong Kong Securities and Futures Commission further pointed out that cryptocurrency platforms seeking to obtain licenses need to conduct on-site office inspections to avoid the emergence of any shell companies. As a retail investor, I feel very reassured by such active regulatory handling.
For major centralized exchanges to announce their withdrawal from the Hong Kong market, it may have a certain impact on the development of Web3 in Hong Kong in the short term. However, when we look forward to the long-term development of Web3 in Hong Kong, strict supervision is believed to bring better development to the Web3 ecosystem in Hong Kong.
