The Hong Kong Securities and Futures Commission (SFC) is planning to conduct inspections at the offices of cryptocurrency trading platforms looking to operate as licensed virtual asset trading platforms (VATPs) in the region.
In a recent announcement on May 28, the commission highlighted that the “non-contravention period” for VATPs in Hong Kong will end on June 1. Any platforms considered “deemed-to-be-licensed” will be subjected to on-site inspections to ensure compliance with the SFC’s regulatory requirements, focusing on client asset protection and know-your-client processes.
Failure to meet the necessary compliance standards will result in license denial and potential regulatory actions as determined by the SFC. Currently, 18 entities are classified as “deemed-to-be-licensed” until the completion of the licensing process. After the June 1 deadline, any unlicensed platforms operating would be violating anti-money laundering and counter-terrorism laws.
It is important to note that deemed-to-be-licensed VATP applicants are not officially licensed and cannot advertise their services or onboard retail users. If an application is rejected, the VATP must submit a plan for the orderly closure of its business in Hong Kong while safeguarding client interests.
At present, only OSL Digital Securities Limited and Hash Blockchain Limited are listed as fully licensed VATPs. Some applicants have withdrawn their applications due to failure to meet regulatory requirements. For instance, the Hong Kong branch of Gate.io withdrew its application on May 22, and OKX stopped its services in Hong Kong after withdrawing its license application on May 24.
These licensing requirements come amidst an increase in cryptocurrency-related scams in Hong Kong. In March, the SFC warned about platforms impersonating the region’s two licensed platforms, OSL Digital and Hash Blockchain Limited.
In other news, Hong Kong is reportedly exploring the use of retail digital currency for mortgage pricing.