Hong Kong ends license applications for crypto exchanges

Hong Kong has officially ceased accepting license applications from cryptocurrency exchanges as of February 29, signaling a stringent regulatory shift.

The Securities and Futures Commission (SFC) announced that all crypto trading platforms operating without having applied for a license must conclude their operations in the region by May 31, 2024.

The SFC has issued a directive to investors engaged with virtual asset trading platforms to prepare for migrating their assets to licensed entities or those that have submitted their applications for a license. As of now, OSL Digital Securities and HashKey Exchange are the only two operators formally licensed by the SFC, having received their approvals on December 15, 2020, and November 9, 2022, respectively.

In total, the regulator disclosed that 22 crypto trading platforms had applied for operational licenses under the new regulatory framework, including four exchanges initially under the SFC’s optional regime for crypto trading platforms. However, four exchanges — Huobi HK, Meex, BitHarbour, and Ammbr — either withdrew their applications or had them returned by the SFC.

To protect investors and ensure transparency, the SFC plans to publicly list the crypto platforms required to shut down by law, highlighting the risks associated with unlicensed trading activities. During the wind-down period leading up to the May 31 deadline, affected exchanges will see their operational capabilities restricted, including a ban on all marketing activities within Hong Kong.

Post-closure, the SFC will release a list of exchanges deemed licensed as of June 1, 2024, though this does not guarantee license approval for all applicants. The licensed platforms will be allowed to onboard retail investors for trading Bitcoin, Ether, and potentially other altcoins and stablecoins pending SFC review.

The regulatory developments come hot on the heels of BitForex, the Hong Kong-based cryptocurrency exchange, abruptly went offline following a mysterious withdrawal of $57 million from its hot wallets. Blockchain detective ZachXBT was among the first to spotlight this, revealing that BitForex has ceased withdrawal transactions and its team appears to be unresponsive.

Efforts to access BitForex’s official website now result in a message indicating that access is blocked. This incident follows last year’s warnings from regulators in Japan against the exchange for operating without proper registration, alongside others like Bitget, MEXC Global, and Bybit. In 2019, Chainalysis also reported suspicions of inflated trading volumes by BitForex.

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