Concerns are mounting over whether 11 crypto exchanges that initially received provisional licenses will successfully obtain full licenses in Hong Kong, according to Bloomberg.
Among the 11 exchanges seeking full licenses are major players like Crypto.com and Bullish, along with HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin, and Matrixport HK.
While Crypto.com declined to comment, the other exchanges did not respond to inquiries from Bloomberg.
According to sources familiar with the matter, the Securities and Futures Commission (SFC) uncovered issues during on-site inspections of the “deemed-to-be-licensed” platforms.
These inspections, conducted since the exchanges gained their provisional status in June, revealed some companies are overly reliant on a small number of executives for managing client assets and are not adequately addressing cybercrime risks.
The specific firms that fell short of the SFC’s standards remain undisclosed, and the inspections are ongoing.
An SFC spokesperson emphasized that inspections focus on ensuring compliance with safeguarding client assets and know-your-client (KYC) processes.
The spokesperson added that exchanges unable to address critical deficiencies identified during inspections may lose their deemed-to-be-licensed status or have their applications rejected.
The exchanges currently under scrutiny are barred from onboarding new clients until they secure full licenses.
If they fail to meet requirements, they may have to restart the application process from scratch.
Full licenses are expected to be issued by the end of 2024 for firms that comply with all regulatory criteria, SFC CEO Julia Leung stated in June.
It is also worth noting that the SFC received 17 applications for virtual asset trading platform (VATP) licenses in the quarter.
As of now, only two platforms, OSL and HashKey, have obtained full licenses in Hong Kong.
Companies operating before the city’s new regulatory regime took effect were permitted to continue while applying for a license, but non-applicants were required to exit the market by the end of May.
The licensing process has already led to the withdrawal of 12 applications, including those from Huobi HK, OKX, Bybit, and VAEX.
Featured image credit: Edited from Pixabay
