The Hong Kong Securities and Futures Commission (SFC) is set to commence onsite inspections of cryptocurrency trading platforms seeking licenses to operate as virtual asset trading platforms (VATPs) in the region.
In a statement released on May 28, the SFC reminded stakeholders that the “non-contravention period” for VATPs operating in Hong Kong will conclude on June 1. This period allowed certain platforms to operate temporarily while awaiting formal licensing.
The SFC announced that platforms currently “deemed-to-be-licensed” will undergo onsite inspections to ensure compliance with the SFC’s regulatory standards. These inspections will primarily focus on the safeguarding of client assets and the execution of know-your-client (KYC) processes.
The SFC emphasized that any applicant found in violation of the compliance requirements would face license denial and potential additional regulatory actions.
Presently, 18 entities hold the “deemed-to-be-licensed” status, a temporary classification pending the completion of the full licensing process. After the June 1 deadline, any unlicensed platform offering services would be in direct violation of anti-money laundering and counter-terrorism laws.
The SFC clarified that these deemed-to-be-licensed VATP applicants are not formally licensed and are therefore prohibited from marketing their services or onboarding retail users. Should the SFC reject a VATP’s application, the platform must submit a plan for the orderly winding down of its business in Hong Kong, prioritizing the protection of client interests.
As of now, only two entities—OSL Digital Securities Limited and Hash Blockchain Limited—are fully licensed VATPs.
Some applicants have already withdrawn their applications after failing to meet the SFC’s stringent requirements. Notably, the Hong Kong branch of crypto exchange Gate.io withdrew its application on May 22, followed by crypto exchange OKX on May 24, which halted its services in Hong Kong upon withdrawing its application.
These licensing measures come amid a rise in cryptocurrency-related scams in Hong Kong. In March, the SFC warned of platforms impersonating the region’s two licensed platforms, OSL Digital and Hash Blockchain Limited.
The SFC’s stringent approach underscores its commitment to ensuring a secure and compliant environment for cryptocurrency trading in Hong Kong.
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