Hong Kong has revealed that it plans to license more crypto exchanges before the end of 2024. This decision comes after the completion of a five-month inspection period by the Securities and Futures Commission (SFC), which saw the regulator ensuring regulatory compliance and tightening oversight on crypto exchanges. A Bloomberg report details the announcement as follows:
Sharing the update at the annual Fintech Week event on Monday, Eric Yip, SFC’s executive director for intermediaries, noted that most applicants have made notable changes to their operational setups. These improvements, based on SFC’s feedback, show the intent of the said firms to keep operating responsibly within the regulated framework.
Hong Kong Crypto License Regime: Efforts Geared Towards Becoming a Global Crypto Hub
Hong Kong introduced its digital asset licensing regime in 2023. This was part of its broader efforts and ambition to become a global crypto hub. However, progress has been slower than expected. So far, only three platforms have been fully licensed, while 11 others hold provisional permits. Initial inspections by the SFC identified several operational issues that applicants needed to address. Once these exchanges meet the SFC’s requirements, they can then receive licenses for restricted operations. That is, as long as they also complete a third-party review in collaboration with the SFC.
Rising From The Ashes
It might be worth noting that Hong Kong’s crypto policy is a strategy that the city is looking to employ. That is as it seeks to reestablish its reputation as a top financial hub. Especially in the light of the fact that other major markets like the U.S. have not been able to fully embrace crypto.The new licensing system, launched in June, is designed to regulate exchanges dealing in popular tokens such as Bitcoin and Ethereum. This approach not only appeals to institutional investors but also protects retail investors by enforcing strict guidelines on assets and trading practices.
A major focus of the SFC’s regulations is consumer protection. Crypto exchanges are required to assess users’ knowledge and set financial limits to protect retail investors from excessive losses. Additionally, tokens available on these platforms must meet strict criteria, such as being listed on reputable crypto indexes and maintaining a substantial market capitalization.
Interestingly, crypto trading remains prohibited in China’s mainland. However, Hong Kong’s distinct regulatory environment still allows it to act independently. That is, under the “one country, two systems” principle.
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