Deadline looms for Hong Kong crypto exchanges to apply for licensing

Originally appeared on Cointelegraph

Crypto exchanges in Hong Kong have until Feb. 29 to apply for a virtual asset trading platform (VATP) license issued by the city’s Securities and Futures Commission (SFC) or otherwise liquidate their business and exit the region within three months.

As of Feb. 26, 18 crypto exchanges have applied for registration with the SFC, including OKX, Bybit, and Binance-linked HKVAX. Four other applications have been withdrawn since the licensing regime opened in August 2023. Huobi HK, the Hong Kong subsidiary of crypto exchange Huobi (now HTX), filed a VATP application on Feb. 20 but withdrew it three days later. The exchange did not state why it withdrew the application.

Once licensed, the crypto exchanges can onboard retail investors to trade Bitcoin and Ether. Various altcoins and stablecoins are currently under review by the SFC for trading approval.

Currently, the only exchanges that have received their Hong Kong VATP licenses are OSL and HashKey. According to local news reports, exchanges that do not abide by the VATP requirements must cease all operations by May 31. Likewise, exchanges whose VATP application i rejected by the SFC must also leave the city within three months.

Despite a clear regulatory pathway, unauthorized crypto exchanges remain a persistent problem in Hong Kong.

In 2023, JPEX and Hounax, two of the largest crypto exchanges in Hong Kong, collapsed after allegations of Ponzi scheme operations surfaced. An estimated $180 million of investors’ money was lost in the JPEX scandal, while 145 victims lost a combined $18.9 million in the Hounax scam. Although authorities have frozen some of the funds linked to JPEX and Hounax, most investors’ money remains lost.

On Feb. 26, yet another Hong Kong crypto exchange, BitForex, came under fire after halting user redemptions and withdrawing $56 million from its hot wallets the day prior. The exchange has also stopped responding to user inquiries. An investigation is ongoing.