As a crucial deadline approaches, the Securities and Futures Commission (SFC) of Hong Kong will visit cryptocurrency trading platforms that wish to proceed with their licencing applications in person, the regulator revealed on Tuesday.
Virtual asset trading platforms (VATPs) in Hong Kong are trading platforms that offer cryptocurrency trading services. By June 1, 2024, all of these platforms must have an SFC licence or be in a temporary arrangement known as “deemed-to-be-licensed,” which allows them to trade until they obtain a complete licence.
A violation of anti-money laundering and counterterrorism rules will become a “criminal offence to operate in Hong Kong” from that date, according to the SFC.
“In the coming months, whilst the deemed-to-be-licensed VATP applicants pursue their applications, the SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on their safeguarding of client assets and know-your-client processes,” the press release stated.
According to the SFC, applicants should not actively promote their services or bring on new retail clients until receiving their complete licence. The only two companies that are currently mentioned as having SFC licences are OSL Digital Securities Limited and Hash Blockchain Limited.
Eleven entities have either removed or withdrew their applications, leaving only eighteen entities’ applications in the system. Huobi Hong Kong and OKX, two cryptocurrency exchanges, recently withdrew their applications.
Specifically, it will become evident by June 1st just how many of the eighteen businesses are still listed in the SFC system as “deemed-to-be-licensed.” Should any or all of the 18 candidates fail to get past this crucial deadline, Hong Kong’s efforts to establish itself as a leading centre for cryptocurrency may come under investigation.
According to the SFC, applicants should not actively promote their offerings or bring on new retail customers until obtaining a complete licence. According to Angela Ang, a senior policy adviser at blockchain intelligence company TRM Labs, “it’s unsurprising that SFC plans to introduce a higher level of scrutiny than is typical during an application process, such as onsite inspections.”
“The recent spate of application withdrawals may also be an effort by the SFC to clean house before the deeming arrangement comes into effect.”