New regulations governing cryptocurrency exchanges came into force in Hong Kong on 1st June, now allowing these crypto platforms to cater to retail customers, provided they attain and comply with licences aimed at improving investor safeguards.
In order for digital asset exchanges to legally function in Hong Kong, they must abide by a multitude of rules, ranging from guaranteeing the safekeeping of assets to the avoidance of conflicts of interest, as well as meeting cybersecurity standards.
The new framework also mandates these exchanges to establish and implement exposure limits for their retail clientele, and only permit trading in tokens that maintain high liquidity. Notably, as crypto trading is presently outlawed in China, the operators cannot accept retail traders from the mainland.
Crypto exchanges have been given a year’s transition period to secure a retail licence from the Hong Kong Securities and Futures Commission (SFC). The new regime requires all trading platforms and exchanges to apply for a licence, failing which would result in fines and jail terms.
This regulatory adjustment has been introduced amidst intensified scrutiny on leading cryptocurrency exchanges, following a succession of significant mishaps such as the FTX trading platform’s unexpected, swift collapse.
Amidst the evolving regulatory and acceptance climate impacting digital assets globally, Hong Kong has made known its intention to become a crypto innovation hub, and enabling trading by retail investors is a part of that transition.
Over 80 crypto companies have expressed desire to apply for the retail crypto licence in Hong Kong. Here are 10 notable ones that have announced plans to apply for the licence:
HashKey PRO
HashKey Pro is a new regulated virtual asset exchange that is operated by Hash Blockchain Limited, a member of the digital asset financial services group HashKey Group. Designed to provide professional investors automated trading services for cryptocurrencies and other innovative assets like security tokens, HashKey Pro has received approval from the SFC to operate a virtual asset trading platform under a Type 1 (dealing in securities) licence and a Type 7 (providing automated trading services) licence for professional investors.
HashKey Pro is also one of the platforms to have announced its submission for the licence application to offer retail crypto services in Hong Kong.
Gate.io
Gate.io is a leading global cryptocurrency exchange that is operated by Gate Group, offering diverse trading services with 100% user-verifiable Proof of Reserves, and it has grown to serve over 12 million users globally.. It has been consistently ranked as one of the top 10 cryptocurrency exchanges based on liquidity and trading volume, topping Forbes Advisor’s list of Best Crypto Exchanges for 2023.
Gate.io has announced its intention to apply for the retail crypto licence in Hong Kong through its Hong Kong-based company, Hippo Financial Services Limited, which has already obtained a Trust or Company Service Provider (TCSP) Licence that allows it to provide virtual asset custodial services to global users. The company plans to launch Gate HK, a new platform tailored to serve the Hong Kong market.
CoinEx
CoinEx is a Hong Kong-based cryptocurrency exchange that offers various trading services, including spot, margin, perpetual contract, and leveraged ETF trading. CoinEx has signalled its intention to apply for the retail crypto licence in Hong Kong by launching a local platform called BitHK, which submitted its Virtual Asset Service Provider (VASP) licence application to the SFC on 1 June, 2023.
Huobi
Huobi is one of the world’s largest crypto exchanges that also operates a Hong Kong-based subsidiary called Huobi Technology Holdings or Huobi HK, via which Huobi has revealed its submission for a VASP licence application to the SFC. Huobi HK has also started offering crypto spot trading and virtual asset custody to retail and institutional clients in Hong Kong.
OKX
OKX is another major crypto exchange that is headquartered in Hong Kong, has a local entity called OKX HK Limited, and was one of the first to declare interest to apply for the retail crypto licence, along with Huobi. OKEx rebranded as OKX in 2022 to declare it had become “more than an exchange” thanks to a wider range of products.
OSL
Digital asset platform OSL was the first to obtain approval from the SFC to operate a virtual asset trading platform under Type 1 and Type 7 licences in 2020, and has now confirmed to Yahoo Finance that it is planning to expand its services to retail investors. OSL offers various services, including brokerage, exchange, custody, and even software-as-a-service (SaaS). OSL is operated by BC Technology Group, which claims to be the world’s first and only SFC-licensed, listed, digital asset wallet-insured, Big-4 audited digital asset trading platform for institutions and professional investors.
BitMEX
BitMEX is a crypto derivatives exchange that was founded in Hong Kong and recently settled a US lawsuit over anti-money laundering violations. The Seychelles-based cryptocurrency exchange offers various trading services including futures, perpetual contracts, and options. BitMEX revealed its intention to apply for the retail crypto licence by launching a new platform called BitMEX Hong Kong, offering spot trading and cryptocurrency conversion.
Binance
It’s no surprise that Binance, the world’s largest cryptocurrency exchange by trading volume that allows users to trade over 350 digital assets, has shown interest in this opportunity to offer services in Hong Kong, which is a major financial hub in Asia.
Binance currently does not have a licence to operate in Hong Kong. and has faced regulatory scrutiny from other jurisdictions over its compliance issues. By obtaining a licence in Hong Kong, Binance could demonstrate its commitment to following the local laws and regulations and attract more customers who value security and legitimacy.
ZA Bank
ZA Bank is one of the first and largest virtual banks in Hong Kong with over 400,000 customers as of June 2022. According to CoinTelegraph, ZA Bank is also interested in applying for a retail crypto licence in Hong Kong, reportedly planning to partner with “with locally licensed virtual asset exchanges to obtain regulatory approvals”.
ZA Bank plans to apply for the licence to meet the changing needs of its customers in Hong Kong, where the bank has previously stated its intentions to act as a “settlement bank” exclusively with licensed crypto exchanges that comply with regulatory requirements. By obtaining a licence in Hong Kong, ZA Bank could leverage its virtual banking platform and offer a convenient and secure way for its customers to access the crypto market.
Greenland Holdings
Greenland Holdings is one of the largest and most diversified real estate companies in China, with a global presence in over 10 countries. Chinese state-owned Greenland Holdings has a strong portfolio of real estate projects in various regions, and has been seeking to diversify its revenue sources amid ongoing market challenges, setting up Greenland Financial Technology Group with the intention to trade assets including cryptocurrencies, NFTs and carbon credits.
By applying to obtain a licence in Hong Kong, Greenland Holdings could leverage its real estate expertise and offer a novel and integrated way for its customers to access the crypto market.
As the world watches to see who will secure these coveted retail cryptocurrency licences, it’s clear that the digital assets sector continues to evolve and disrupt traditional financial paradigms.
Most of these noteworthy companies have publicly expressed their interest in obtaining the licence, but there may be others that have not disclosed their plans yet. The wider industry will have to wait until the SFC announces the applicants – not to mention which applications the governing body will be accepting.
