Author: Nancy, PANews
After OSL Exchange, HashKeyExchange, and HKVAX, Hong Kong licensed virtual asset trading platforms (VATP) welcomed four new members. On December 18, the Hong Kong SFC announced the issuance of licenses to four virtual asset trading platforms under a fast-track licensing procedure, including Cloud Account Greater Bay Area Technology (Hong Kong), DFX Labs, Hong Kong Digital Asset Trading Group, and Thousand Whales Technology.
At the same time, the Hong Kong SFC is accelerating the approval process for virtual asset licenses and formulating a clear roadmap for the licensing procedure to further expand Hong Kong's presence in the Web3 field.
Four platforms have been licensed by the Hong Kong SFC
This time, the Hong Kong SFC granted licenses to four platforms at once, increasing the number of licensed virtual asset trading platforms in Hong Kong to seven.
HKbitEX: Former Hong Kong Stock Exchange official launched, has secured tens of millions of dollars in funding
HKbitEX was launched by Hong Kong Digital Asset Trading Group Limited, established in 2019, and is dedicated to providing compliant and regulated digital asset spot trading and over-the-counter (OTC) trading platforms for professional investors worldwide.
It is reported that the parent company behind Hong Kong Digital Asset Trading Group is Taiji Capital Group, which mainly provides tokenized asset services, including three major sectors: capital markets and wealth management, digital asset exchanges, and Web3 SaaS and technology R&D. In September 2023, Taiji Capital also announced the launch of Hong Kong's first real estate fund security token offering (STO), with tokens PRINCE issued by its subsidiary Pioneer Asset Management aiming to raise about HKD 100 million at that time. Taiji Capital's founder Gao Han previously worked at the Hong Kong Stock Exchange, mainly responsible for promoting the exchange's products in Mainland China, including Stock Connect and Bond Connect, and Taiji Capital has also attracted several senior executives from the Hong Kong Stock Exchange.
As one of the first applicants for the Hong Kong SFC's virtual asset trading platform license, HKbitEX has received multiple rounds of funding, including in December 2020, when HKbitEX announced the completion of $10 million in Series A2 funding, led by Axion Global Investment Limited, a subsidiary of Hong Kong-listed company Anling International, along with other investors including De Ding Innovation Fund, Jianfeng Capital Management, Lenovo Capital, and Lingfeng Capital; in November 2021, HKbitEX announced again that it completed $9 million in Pre-B round funding, raising a total of $300 million.
Accumulus: Backed by a Chinese Fortune 500 company
The virtual asset trading platform Accumulus was launched by Cloud Account Greater Bay Area Technology (Hong Kong) Limited, which went live in Hong Kong in April 2023 and officially submitted its license application for a virtual asset trading platform to the Hong Kong SFC at the end of the same year.
Cloud Account Hong Kong is registered by Cloud Account and is the only overseas business headquarters. The group has obtained an approved foreign direct investment quota of 985 million RMB from the National Development and Reform Commission and other approvals in Mainland China, supporting Cloud Account Hong Kong's focus on expanding its business in Web 3.0. According to official information, Cloud Account is China's largest online human resources service enterprise, serving 110 million new employment format workers (freelancers) from 138 countries and regions, and was selected as one of the '2024 China Top 500 Enterprises' with a revenue of 108.4 billion yuan this year.
DFX Labs: The team has years of experience in blockchain industry
DFX Labs (DFX Labs Company Limited) was the last applicant for a virtual asset trading platform in Hong Kong last year. The DFX Labs team has rich experience in the fields of blockchain and fintech, for example, Chief Operating Officer Simon Au Yeung previously served as CEO of Blockchain Finance and virtual asset trading platform BGE, as well as co-chair of Hong Kong IEEE, and Chief Technology Officer David H. has worked for Morgan Stanley, Dell Technologies, and HashKey Group, among others.
EX.IO: Internet broker under Sina as a major investor
EX.IO (formerly known as xWhale), launched by Thousand Whales Technology (BVI) Limited, is Hong Kong's first and only licensed entity with a brokerage background, with Sina's internet brokerage Huasheng Capital Group as the major investor, along with investments from Longling Capital and Weixin Jin Ke (HKG: 2003). EX.IO was initially named xWhale and was established after a strategic agreement between the original Web3 trading platform BusyWhale and Huasheng Securities was reached last May.
Release six-step roadmap for licensing procedures, will establish advisory group early next year
Despite Hong Kong's strong determination to develop Web3, which has attracted many crypto ecosystem projects/platforms to apply for membership, there has been a phenomenon of licenses being continuously revoked during the transitional period of license applications. By June, only 11 platforms were considered as license applicants, and the challenges faced by Hong Kong are not to be overlooked.
In order to enhance approval efficiency and ensure compliance, Hong Kong launched an inspection program in June this year, completing related on-site inspections for all licensed applicants, achieving direct results. Therefore, the SFC decided to continue this practice when appointing external evaluation experts for the second phase of evaluation for virtual asset trading platforms.
“We have always actively communicated with the senior management and ultimate controllers of virtual asset trading platforms, which helps us clarify the regulatory standards that should be met and expedite the regulatory standards for virtual asset trading platforms,” said Ye Zhiheng, Executive Director of the Intermediaries Division of the Hong Kong SFC.
In the latest circular, the Hong Kong SFC has also formulated a clear roadmap for the licensing procedure for virtual asset trading platforms:
1. On-site inspections and providing opinions, requiring the platform to submit a rectification plan.
2. After reaching a consensus on the rectification plan, a conditional license will be granted, and the platform will continue to complete the rectification measures as planned, conduct penetration testing and vulnerability assessments, and achieve satisfactory results before operating within a restricted business scope;
3. Penetration testing and vulnerability assessments should be conducted by independent third parties, and the platform's management should ensure that all significant and critical rectification measures are continuously taken.
4. After completing rectification measures, vulnerability assessments, and testing, the platform may be allowed to operate under a restricted business scope.
5. The platform must engage external experts to evaluate the revised policies and procedures (including amended procedures and monitoring), and the SFC will oversee the entire second phase evaluation process, clarifying regulatory provisions and providing opinions on the evaluation results.
6. The SFC will revoke the licensing conditions related to restricted business scope after the completion of the second phase evaluation, which will focus on ensuring that the policies, procedures, systems, and monitoring measures (policies and procedures) of the virtual asset trading platform are properly designed and implemented, and will be conducted through direct verification.
“We are working hard to regulate this emerging market, but it is no easy task, as it is a vast existing market with advanced technology, no borders, and imperfect regulations. The Hong Kong Securities and Futures Commission (SFC) will establish a formal advisory group for all licensed platforms in early 2025, with senior representatives from each licensed institution appointed. This will allow the SFC to fully listen to and consider their views. This will enable us to brainstorm and systematically prioritize development matters based on investor protection.” Ye Zhiheng previously revealed that the SFC also disclosed that it will provide more guidelines on the licensing scheme for new entities applying for a license to operate a second virtual asset trading platform in early 2025.