Hong Kong Shuts Down on Unlicensed Crypto Exchanges

February 8, 2024

By Sharan Kaur Phillora

Hong Kong’s Securities and Futures Commission (SFC) has set a firm deadline for cryptocurrency exchanges operating within the city: secure a license by the end of February or face closure by May 31. This directive is part of a broader initiative to integrate cryptocurrency trading within the regulatory framework, ensuring a safer and more transparent digital asset market.

Here’s what we know:

The SFC’s mandate targets virtual asset trading platforms (VATPs) that have been operating in a regulatory gray area. With the introduction of a licensing regime for crypto exchanges last June, Hong Kong aims to position itself as a regional hub for digital assets. To date, only two exchanges, HashKey and OSL, have been granted licenses to serve retail customers, a significant milestone under the new regulatory landscape.

The urgency of this compliance requirement has been underscored by recent events, including high-profile fraud cases such as the JPEX trading platform scandal, which resulted in significant financial losses. In response, the SFC has bolstered its oversight, adding four more exchanges to the list of VATP license applicants, including notable platforms like Bybit and the Binance-linked HKVAEX.

The city’s regulatory framework, amended last year to include virtual asset regulations, mandates that any company marketing cryptocurrencies to Hong Kong residents must apply for a license by the stipulated deadline or cease operations.

This move aligns with global trends towards more stringent crypto regulations, with Hong Kong setting particularly high standards, such as the requirement for 98% of customer funds to be stored in cold wallets.

As the deadline approaches, the SFC has advised investors to withdraw their funds from unlicensed platforms by May 31 and to only engage with SFC-licensed VATPs to minimize the risk of fraud. This guidance reflects Hong Kong’s commitment to creating a secure and regulated environment for cryptocurrency trading, balancing innovation with investor protection.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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