Hong Kong’s SFC to Expand Crypto Exchange Licensing Before Year Closes

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

The Hong Kong Securities and Futures Commission (SFC) recently disclosed plans to issue more crypto licenses to digital asset businesses by the end of 2024. This announcement comes after HKVAX became the third licensed crypto exchange in the city, thus signaling a step toward improving regulation and legitimizing the crypto sector in one of Asia’s major financial hubs.

SFC Crypto Licenses Will be Issued in Batches

In an interview with local outlet Hong Kong 01 on October 6, SFC CEO Julia Leung stated that the regulatory body plans to grant SFC crypto licenses in batches, a strategy that will allow more crypto exchanges to gradually enter the market.

Leung mentioned that 11 Virtual Asset Trading Platforms (VATPs) are currently on the SFC crypto license list. The agency has already completed its first round of inspections and provided feedback, advising these firms to make necessary adjustments before they can proceed.

Notably, this latest development comes after the SFC recently approved the Hong Kong Virtual Asset Exchange (HKVAX) as the third licensed crypto platform, joining OSL Exchange and HashKey Exchange in the region.

Leung clarified that by expanding the number of licensed exchanges, Hong Kong aims to create a regulated environment for cryptocurrency trading, which could increase investor confidence and attract international interest in its market.

She also noted that companies failing to meet the required standards will be disqualified from the licensing process.

In 2018, the SFC introduced a regulatory framework for virtual asset trading to ensure transparency and protect consumers.

This was followed by the implementation of regulations in 2020 requiring crypto exchanges to register with the SFC, laying the groundwork for a more organized and compliant trading environment.

The new licensing regime, officially launched in June 2023, reflects Hong Kong’s welcoming stance towards crypto firms by allowing licensed exchanges to offer retail trading services.

Leung Unveils Long-Term Plans for Regulatory Framework

In her interview, Leung discussed the SFC’s exciting roadmap for 2024 to 2026. She explained that Hong Kong wants to improve rules for virtual asset platforms, support the tokenization of traditional assets, and explore new technologies like blockchains and Web3.

The regulator’s CEO expects to finalize these regulations by next year, showing a strong commitment to a safe and organized crypto market.

Leung also mentioned a new licensing system for over-the-counter (OTC) crypto custody services, which will seek feedback from industry players to help the SFC improve its approach based on real-world experiences.

OTC in crypto refers to trading facilitated by brokers, rather than on traditional exchanges, allowing for larger transactions without impacting market prices.

This thorough approach to regulation aims to protect investors while creating a friendly environment for crypto businesses, helping to strengthen Hong Kong’s position as a key financial center in Asia.

As nearby regions like Singapore also grow in the cryptocurrency market, Hong Kong’s actions show its desire to attract investments and encourage innovation.

In April, the CEO of China Asset Management, Yimei Li stated that Hong Kong crypto ETFs would create opportunities for Chinese investors seeking alternative investment options.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.