Hong Kong's Clampdown on Unlicensed Cryptocurrency Exchanges

Hong Kong has implemented stringent measures against unlicensed cryptocurrency exchanges, issuing an immediate shutdown order. The Securities and Futures Commission (SFC) in Hong Kong has announced that eleven platforms, namely HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixincom, xWhale, YAX, Bullish, Crypto.com, WhaleFin, and Matrixport HK, are now considered applicants awaiting licensing.

Among the prominent offshore exchanges, only Crypto.com has obtained approval, with others like OKX, Bybit, Gate, HTX, and Binance opting to withdraw. Authorities in Hong Kong have made it clear that cryptocurrency exchanges must either seek licensing by February 29 or terminate operations within three months to safeguard investor interests.

The pressure intensified as over 22 cryptocurrency exchanges initiated the application process to maintain their regional activities. However, as the deadline approached, many exchanges retreated and withdrew their applications.

Gate.HK, headquartered in Hong Kong, acknowledged the necessity for a significant platform overhaul to adhere to the stringent regulatory standards in Hong Kong.

Various applicants, including Gate.HK, encountered obstacles detailed by prominent blockchain journalist Colin Wu. These challenges included the SFC's requirement that license applicants commit not to engage mainland Chinese users worldwide, proving to be a decisive factor leading to their reluctance.

Today, the new licensing framework for virtual asset trading platforms (VATP), established by the China Securities Regulatory Commission, has come into force. The transitional arrangements under this system enable operators to apply for a license and conform to the updated regulatory norms starting June 1.

This provision allows them to continue offering virtual asset services in Hong Kong until the authorities render a final verdict on their license petitions.

Speaking on the issue, Colin Wu highlighted a Hong Kong legislator's critique, emphasizing the modest scale of current applicants and the importance for Hong Kong to uphold a cautious approach from the outset, aiming to foster innovation without any form of risk.