By Anjali Kochhar<\/p>\n\n\n\n
Many bitcoin exchanges in Hong Kong that are \u201cdeemed to be licensed\u201d remain upbeat about the city\u2019s virtual asset industry, despite recent withdrawals. Eleven businesses have made progress toward gaining a license thanks to Hong Kong\u2019s stringent regulatory framework, while others are doubting the feasibility of operating in such a small market.<\/p>\n\n\n\n
A surge of withdrawals from key worldwide crypto exchanges, including OKX, Bybit, and Gate.io, has shattered trust in Hong Kong\u2019s Web3 development. Duncan Chiu, a Legislative Council member, recently slammed the city\u2019s laws as \u201coverly harsh\u201d in an opinion piece, underlining the issues created by restrictions implemented last year.<\/p>\n\n\n\n
The Securities and Futures Commission (SFC) has explicitly instructed platform operators to not serve mainland Chinese residents, compounding the difficulties faced by exchanges. High costs and extensive technical and operational overhauls required to comply with regulations that took effect in June 2023 have led over a quarter of the initial 24 license applicants to withdraw, forcing them to shut down operations in Hong Kong.<\/p>\n\n\n\n
\u201cIt\u2019s natural that they would withdraw their applications, as the trade-off between the size of the retail market in Hong Kong and the high regulatory costs, along with the impact on their global operations, isn\u2019t justified,\u201d said Alessio Quaglini, co-founder and CEO of Hong Kong-based cryptocurrency custody provider Hex Trust.<\/p>\n\n\n\n
\u201cThe current framework in Hong Kong is very restrictive, which deters global companies from establishing substantial operations here,\u201d Quaglini added. \u201cIf the aim is to position Hong Kong as a global hub, the strategy is sound but the execution should be improved.\u201d<\/p>\n\n\n\n
Central to the SFC\u2019s regulatory approach is the principle of \u201csame activity, same risks, same regulation,\u201d which emphasizes investor protection by requiring virtual asset market participants to meet the same standards as those in traditional finance. Jonathan Crompton, a partner at law firm RPC in Hong Kong, noted that the withdrawal of major exchanges shows that \u201cthe SFC is not driving forward at any cost.\u201d<\/p>\n\n\n\n
Exchanges still pursuing a license in Hong Kong see reasons for optimism. Many have strong ties to the city, including Crypto.com, the largest among the 11 firms recently \u201cdeemed to be licensed,\u201d a prerequisite for continued operation while awaiting full approval. Bullish, the owner of CoinDesk and the next largest deemed applicant by trading volume, is bringing its major crypto conference, Consensus, to Hong Kong next year.<\/p>\n\n\n\n
\u201cWe have always believed that regulatory clarity brings confidence and enables firms like Bullish and jurisdictions like Hong Kong to progress forward and innovate,\u201d said Michael Lau, global head of sales at Bullish. The company has never served mainland customers and is unaffected by the rule barring such activity.<\/p>\n\n\n\n
Sean Lawrence, head of Asia-Pacific at blockchain data analytics firm Kaiko, noted that continued investment and pursuit of local licenses \u201ccan only be seen as an endorsement of Hong Kong as [having] huge potential for virtual assets, and a testament to the regime the SFC has so far prescribed.\u201d He also suggested that some withdrawn applicants may reapply as technology and risks evolve.<\/p>\n\n\n\n
\u201cAs far as I know, some of them will try again,\u201d said Legislative Council member Johnny Ng Kit-chong. \u201cThey will handle their affairs internally and try again.\u201d<\/p>\n\n\n\n
This cautious optimism reflects a belief in the long-term potential of Hong Kong\u2019s regulatory environment for virtual assets, despite the immediate challenges.<\/p>\n\n\n\n
About the author<\/strong><\/p>\n\n\n\n Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.<\/p>\n","protected":false},"excerpt":{"rendered":" By Anjali Kochhar Many bitcoin exchanges in Hong Kong that are \u201cdeemed to be licensed\u201d remain upbeat about the city\u2019s virtual asset industry, despite recent withdrawals. Eleven businesses have made progress toward gaining a license thanks to Hong Kong\u2019s stringent regulatory framework, while others are doubting the feasibility of operating in such a small market. […]<\/p>\n","protected":false},"author":1,"featured_media":12480,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-12479","post","type-post","status-publish","format-standard","has-post-thumbnail","category-uncategorized"],"acf":[],"yoast_head":"\n