Hong Kong’s SFC is keenly focused on investor protection and robust know-your-customer (KYC) protocols.
Cryptocurrency exchanges within Hong Kong appear to be having a hard time as they try to secure full operational licenses. A Bloomberg report details the situation, citing sources with inside knowledge on the matter, even as the city ups its efforts towards becoming a global crypto hub.
According to the report, no less than 11 crypto exchanges have been found wanting by Hong Kong’s Securities and Futures Commission (SFC). That is after on-site inspections reportedly showed them to be involved in practices that might be called “non-compliant”.
The situation has immediately cast a shadow of doubt over these exchanges as meeting full licensing requirements may now be a huge mountain to climb.
SFC Cites Issues with Exchanges
There are a number of big industry names among the exchanges currently being scrutinized. They include Crypto.com and Bullish. However, some local trading platforms like HKbitEX and PantherTrade appear to also be on the wrong side of regulatory compliance.
The report confirms that the investigation led by the SFC uncovered some hidden truths about these exchanges. It claims that some exchanges leave the custody of customer assets to a few executives to manage. Whereas others do not even do enough to protect investors, ultimately giving cybercriminals an open field to carry out their bad acts.
As it stands, only two platforms, OSL and HashKey, have been able to secure Hong Kong’s full licenses. However, the regulator promises to issue more by the end of 2024.
Despite the promises, the SFC’s rigorous processes may have caused at least 12 notable crypto exchanges to withdraw their license applications. These include crypto giants like OKX, Bybit, and Huobi HK, among others.
Hong Kong’s Regulatory Requirements
As earlier mentioned, the SFC is keenly focused on investor protection and robust know-your-customer (KYC) protocols. So, these are the key aspects of their requirements, to which it presently seeks to enforce strict discipline and compliance among crypto platforms.
This level of scrutiny, however, did not come to the fore until a huge scandal with JPEX. The unlicensed crypto platform reportedly made away with over $200 million in investor money, leaving more than 2,600 users as victims.
Per the SFC, JPEX had the help of several crypto influencers and was able to mislead a large audience into believing that the exchange had applied for a virtual asset trading platform license in Hong Kong. As it turned out, however, the social media campaign was far from the truth. That is because JPEX never submitted such an application, the SFC revealed.
It remains to be seen how other crypto platforms will yield to the SFC’s regulatory demands. For now, however, bagging a full license in Hong Kong is not a walk in the park.
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