The Hong Kong regulatory authority found that certain supposedly licensed crypto exchanges fail to manage cybercrime risks effectively.
The Hong Kong Securities and Exchange Commission (SFC) has expressed dissatisfaction over the current state of inspection of crypto exchanges, which are still awaiting full licensing in the region. While some applicants have received preliminary approvals from the city’s regulator, they are yet to obtain complete licenses, pending full adherence to the SFC’s requirements.
SFC Discovers Foul Play with Some Crypto Exchanges
During on-site inspections, the Hong Kong regulator discovered that some crypto exchanges considered licensed inadequately address cybercrime risks. Additionally, according to a Bloomberg report, other exchanges rely too heavily on a small number of executives to oversee the management of client assets.
Applicants considered to be “deemed-to-be-licensed” fall under a short-term framework intended for crypto firms already active in the region before the implementation of the licensing regulations.
The report also noted that starting June 1, running an unauthorized virtual asset exchange (VAE) in Hong Kong became a punishable crime, and the SFC announced it would actively target businesses breaching the regulation.
Crypto exchanges in Hong Kong that are still awaiting complete operational licenses include Crypto.com, Bullish, HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin, and Matrixport HK.
According to Bloomberg’s spokesperson, the SFC might revoke platforms’ temporary licensed status or reject their license requests if they cannot address significant issues found during on-site evaluations.
Hong Kong Aims to Become a Global Fintech Hub
Early this month, the Hong Kong government revealed plans to enhance crypto regulations over the next 18 months as part of its strategy to establish itself as a global leader in financial technology.
David Chiu, a representative in the Legislative Council of Hong Kong’s Special Administrative Region, detailed the city’s strategic approach to drawing in tech professionals, developing new infrastructure, and implementing strong regulatory oversight.
Chiu further noted that the digital asset industry has advanced significantly in recent years, and it is essential to create a reliable exchange system and promptly implement regulations for stablecoins.
Since June 2023, Hong Kong has been attracting investors and crypto exchanges to join the new licensing framework, thanks to the SFC’s recently released proposed regulations for virtual asset trading platforms.
Currently, OSL and HashKey are the only two fully licensed crypto platforms in Hong Kong. Other exchanges, such as OKX, Bybit, and Huobi HK, have pulled their applications.