Following the adoption of a digital asset rulebook intended to position Hong Kong as a hub for the industry, the securities regulator for Hong Kong said that 11 cryptocurrency exchanges are almost finished with their licensing process. Prominent websites like Bullish and Crypto.com are among these applicants; as stated on the Securities & Futures Commission (SFC) website, these websites are currently “deemed to be licensed.”
Assuming complete compliance with SFC laws, this move represents a significant advancement for these exchanges, enabling them to operate lawfully and promote their services to local investors. On the other hand, well-known exchanges like Bybit and OKX withdrew their applications, and big companies like Kraken, Coinbase, and Binance did not submit any at all. Every cryptocurrency exchange that is active in Hong Kong has to get a license by June 1.
Strategic Goals to Become the Crypto Hub
In late 2022, Hong Kong initiated its shift towards cultivating a virtual asset hub as a component of larger endeavors to reestablish its reputation as a financial hub after a phase of political turmoil. Developing frameworks for stable coins and digital bond issuance on tokenization platforms, as well as offering spot-Bitcoin and Ether exchange-traded funds (ETFs), are some of the city’s cryptocurrency projects.
Singapore and Dubai are rivaling Hong Kong in becoming the world’s preeminent hub for digital assets. Although it entails high compliance costs, the city’s stringent regulatory structure seeks to strengthen investor protection and stop money laundering and terrorism financing. Approximately twenty-six businesses registered to run cryptocurrency exchanges by the February 29th deadline. As of right now, two exchanges—HashKey Exchange and OSL Group—have officially secured licenses.
Possibilities and Difficulties in Obtaining Mainland Wealth
Hong Kong has historically been an important point of entry for money coming from China’s mainland. However, mainland investors’ access to Hong Kong’s cryptocurrency exchanges and ETFs is restricted by Beijing’s ban on trading in digital assets. Chinese nationals allegedly still look to cryptocurrency for alternative investments in spite of these restrictions, primarily due to declining house values and restricted international transfers. The significant increase in Bitcoin’s value since the beginning of 2023 has increased demand for it.
However, the history of the cryptocurrency exchange industry’s operations in shadowy areas is demonstrated by well-known incidents like the demise of FTX and the most recent legal issues with Binance, which was fined $4.3 billion for breaking US laws. The JPEX cryptocurrency exchange controversy in Hong Kong from the previous year highlighted the difficulties regulators have in monitoring the sector, particularly given that users can get around prohibitions by employing peer-to-peer trading and virtual private networks.
