OSL CFO Davin Wu: Licensed Exchanges at a 'Historic Moment' as Brokers and Family Offices Surge into the Market

Licensed exchanges like OSL have become the lifeblood of Hong Kong's digital asset market.

On 1 June, the transitional period for Hong Kong's digital asset licensing regime concluded, leaving just two fully compliant digital asset exchanges, with OSL being one of the two. This milestone signals the dawn of a new era for the city's digital asset sector.

In recent months, a wave of traditional Hong Kong brokers has entered the digital asset trading arena, increasing interest from investors, financial institutions, listed companies, and family offices, all keen to explore compliant digital asset allocations within Hong Kong’s regulatory framework.

Licensed exchanges are pivotal to this shift, providing the essential infrastructure for trading, custody, and security. For these entities, completing the "final mile" of their digital asset journey is inextricably linked to the services provided by licensed exchanges.

The "historic moment" for licensed exchanges in Hong Kong, and indeed globally, is only just beginning.

Broker + Exchange: Pioneering the Large-scale Adoption of Digital Assets in Traditional Finance

Brokers leading the charge in offering digital asset trading to Hong Kong’s retail investors are adopting an omnibus model of “broker + exchange.” Under this system, brokers establish omnibus accounts with licensed exchanges, executing trades on behalf of their clients.

OSL’s CFO, Davin Wu, asserts that this model not only places Hong Kong at the forefront of compliant digital asset trading but also lays the groundwork for the widespread adoption of digital assets in traditional finance.

Brokers bring their extensive experience in traditional finance, coupled with well-established distribution channels and customer service systems. This enables them to reach millions of existing investors, introducing digital assets as a compelling new investment avenue. Through close collaboration, brokers and exchanges are able to significantly lower barriers to entry, allay concerns about investment risks, and offer tailored investment advice to drive greater engagement with virtual asset trading.

Licensed exchanges like OSL manage the critical backend operations, including custody, matching engine, and settlement. With robust security measures and expert technical teams, these exchanges form a strong defence, safeguarding investors’ assets.

For instance, OSL has made significant investments to comply with the stringent requirements set by the SFC. A considerable portion of this investment is dedicated to investor protection, including:

• Rigorous transaction monitoring to prevent illicit activities

• Comprehensive token listing protocols with thorough due diligence

• Secure private key management and cold wallet systems

• Additional third-party insurance for custodial assets

This synergy between brokers and exchanges not only leverages their respective strengths but also fosters a secure and dynamic digital asset ecosystem.

A Watershed Moment for Licensed Exchanges

The regulatory shift has broader implications beyond brokers and retail investors. With the recent approval of spot Bitcoin and Ethereum ETFs in the U.S. and changing attitudes among American politicians, listed companies and family offices are increasingly looking to the digital asset space.

Traditional financial institutions, including banks and fund companies, also begin to explore partnering with licensed exchanges to diversify their investment offerings.

At a recent industry event, OSL’s Davin Wu noted a marked increase in business for Hong Kong’s licensed exchanges since 1 June. Traditional financial institutions, listed companies, and fund managers are now actively seeking compliant ways to allocate digital assets.

As the Hong Kong digital asset market gains momentum, the importance of licensed exchanges becomes ever more pronounced. Whether integrating the six virtual asset ETFs launched on 30 April or facilitating direct trading and custody of assets like Bitcoin and Ethereum, licensed exchanges such as OSL are pivotal to these operations.

Through unwavering compliance and cutting-edge technology, these exchanges are providing a secure, transparent, and efficient trading environment that meets the growing demands of both institutional and retail investors.

Looking Ahead

As Hong Kong's digital asset ETFs expand, more traditional brokers enter the field, and financial institutions accelerate their digital asset strategies, licensed exchanges are poised to lead Hong Kong’s digital asset market into a new era of maturity and prosperity.

In this new financial landscape, the historic moment for licensed exchanges is not just beginning—it is unfolding right before our eyes.