Cryptocurrency exchanges are exiting Hong Kong, raising concerns about the region’s ambitions to become a global crypto center.
Compulsory license
In response to a new law that came into effect on June 1, virtual asset trading platforms (VATPs) operating in Hong Kong must be licensed under the Anti-Money Laundering and Anti-Terrorism Financing Order (AMLO) to operate legally. Failure to comply is a criminal offense, and strict action will be taken against violators.
Who can get a license?
The Securities and Futures Commission (SFC) of Hong Kong announced that some cryptocurrency exchanges have made progress in obtaining licenses. Among the applicants are companies such as HKbitEX, VDX, HKVAX, PantherTrade, and others. However, notable platforms like OKX have withdrawn their permit applications. Major exchanges like Binance, Coinbase, and Kraken did not apply for licenses.
Prohibition on servicing clients from China
Hong Kong’s approach to cryptocurrencies differs from that of mainland China, which has strictly banned cryptocurrency trading since September 2021. Sources have revealed that the SFC required license applicants to guarantee that their exchanges would not serve users from mainland China in any part of the world, which may have led to the departure of some cryptocurrency exchanges from Hong Kong.
Hong Kong heads to web3
Despite China’s ban on cryptocurrency trading, Hong Kong has actively developed blockchain technology in recent years. The government legalized retail transactions with cryptocurrency in October 2022 and introduced mandatory licensing of crypto service providers from June 1, 2023. This inclusive approach could expand the client base and improve the liquidity and stability of the Hong Kong ETF market.
Will the new rules ruin Hong Kong’s efforts?
Hong Kong’s emphasis on investor protection and anti-money laundering measures could deter those seeking stricter compliance conditions. However, the city offers a potential window to mainland China’s wealth. With the mandatory licensing of crypto exchanges, Hong Kong is poised to further solidify its position as the world’s leading cryptocurrency hub.