Hong Kong’s SFC (Securities and Futures Commission) is set to issue new licenses to allow more exchanges to operate in the country by the end of 2024. The move targets at least 11 crypto firms the regulator has deemed fit for approval.
The Chief Executive of the Securities and Futures Commission, Julia Leung, made the disclosure during an interview with HK01, during which she disclosed that an application by cryptocurrency exchange HKVAX had already been approved. Earlier, Hong Kong financial watchdog SFC had licensed HashKey and OSL.
A Phased Licensing Process
According to Leung, the agency had finished inspecting the 11 crypto exchanges on its “deemed-to-be-licensed” and was waiting for firms to adjust to meet crypto exchange licensing compliance standards. The CEO added that SFC will pursue a phased process during the digital asset licensing procedures to remain in control while welcoming additional applicants. Leung opined that the strategy would allow the watchdog to balance promoting growth and maintaining market stability, which she believes would enhance investor confidence in the volatile crypto space.
The remarks by Leung follow the Hong Kong financial regulator’s approval of an application, HKVAX, last week. The newly approved company, which is the third exchange to be granted approval in the city, plans to officially launch its platform in Q4 2024. Two other applicants, OSL and HashKey, have also received approval from the Securities and Futures Commission.
Deemed to be Licensed Status
On June 3, 2024, the commission updated its website to show that 11 crypto exchanges had submitted applications to operate under the city’s regulatory regime as virtual asset trading platforms (VATPs). Among those 11 crypto exchanges are leading digital asset platforms like Crypto.com and Bullish, the parent company of Coindesk. For the 11 platforms the agency considers “deemed-to-be-licensed,” the new status brings them closer to approval to begin enjoying long-term status in Hong Kong.
The conditional approval of the 11 crypto exchanges should come as a relief to many experts and industry watchers at a time when observers have been questioning the possibility of Hong Kong creating a hospitable environment for cryptocurrency firms. Despite a few firms previously withdrawing their applications, citing the slow pace of application approvals, many observers still believe the city could eventually become a digital asset hub within the APAC region.
Balancing Growth and Market Stability
Many experts consider the city’s financial watchdog’s robust and comprehensive regulatory framework an example of a local crypto exchange licensing regime that could help create a mature digital asset industry. Nonetheless, some on the other side of the spectrum see Hong Kong’s SFC’s slow regulatory framework as a hindrance.
For example, Duncan Chiu, a local lawmaker, remains deeply concerned that the regulator is “overly strict” with its regulations for crypto exchange licensing. According to Chiu, the snail-paced process saw exchanges like HKX, Gate.io, and OKX withdraw their applications, citing what they termed as regulatory challenges. While the latest development highlights the thin line between trying to balance industry growth with market stability, the promise to license these 11 crypto exchanges should be seen as a positive sign showing the city’s commitment to the crypto sector growth.
Conclusion
Hong Kong has pursued an agenda that promotes attracting crypto businesses since 2023 when it introduced a crypto exchange licensing regulatory framework. This program is designed to attract local and international crypto exchanges to promote crypto trading.
The city aims to showcase itself as a leading financial hub specializing in the burgeoning crypto space. As Hong Kong’s City financial regulator pushes forward with its plans, the success of its crypto exchange licensing program will be defined by how it balances between implementing a strict regulatory framework and creating a business-friendly atmosphere.
