The Hong Kong Securities and Futures Commission issues licenses to 4 virtual asset trading platforms.

On December 18, the Hong Kong Securities and Futures Commission, following a rapid licensing process, granted licenses to Cloud Account Greater Bay Area Technology (Hong Kong) Limited, DFX Labs Company Limited, Hong Kong Digital Asset Trading Group Limited, and Thousand Whales Technology (BVI) Limited. Previously, there were already 3 licensed platforms, bringing the total to 7.

The Hong Kong Securities and Futures Commission currently handles license applications in a "three-step" approach: first, the initial applicants agree on improvement actions based on inspection feedback; after improvements, a conditional license is issued allowing limited operations; and finally, collaboration with licensed platforms to lift business restrictions after third-party evaluations.

Since June of this year, 11 entities regarded as “under the licensing process” have completed on-site inspections and are now under review for the remaining applications. The Hong Kong Securities and Futures Commission has communicated with senior platform executives to clarify regulatory standards, will continue this practice when appointing external assessment experts, and issue circulars to outline the roadmap for the licensing process. The licensing procedure includes steps such as inspections, issuing conditional licenses, independent third-party testing and evaluation, restricting business scope operations, appointing expert evaluations, and lifting business restrictions. The second phase of evaluation focuses on the implementation of policy procedures, with any changes or violations needing to be reported, and the evaluations signed by practicing accountants conducted under a tripartite agreement.

The development of virtual assets in Hong Kong is driven by substantial market trading volume, the need for investor protection, and the potential for technological innovation. Contributing factors include talent, economic benefits, and support from the younger demographic. Although regulation is challenging, favorable trends are emerging: practitioners are subject to global scrutiny, and there is a fusion of traditional finance and Web3. The Hong Kong Securities and Futures Commission firmly believes in the future of virtual assets in a regulated market, adhering to the principle of "same business, same risk, same rules." Licensing is the starting point, and by early 2025, a consultation group will be set up for licensed platforms to balance regulation with the business environment and prioritize development matters based on feedback from various parties.

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