Coinspeaker Hong Kong Authorities to Inspect Physical Locations of Crypto Platforms to Ensure Compliance
Authorities in Hong Kong have decided to pay physical visits to cryptocurrency platforms operating in the country to ensure strict compliance. The Hong Kong Securities and Futures Commission (SFC) will inspect companies seeking licenses to operate legally.
SFC to Inspect VATPs
The SFC has set a June 1 deadline for all virtual asset trading platforms (VATPs) offering trading services to either be fully licensed or considered “deemed to be licensed”. The latter is a temporary position before the companies obtain their full licenses. After the deadline, any crypto platform neither fully licensed nor deemed to be licensed would be in breach of counter-terrorism and anti-money laundering laws.
According to an announcement, the visit will ensure platforms adequately protect customer funds:
“In the coming months, whilst the deemed-to-be-licensed VATP applicants pursue their applications, the SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on their safeguarding of client assets and know-your-client processes.”
Earlier this month, the Hong Kong subsidiary of major exchange HTX withdrew its application for a virtual asset trading license a second time. The first withdrawal was in February, a few days after the exchange submitted an application. Now, the HGBL subsidiary is looking to exit the Hong Kong market in August. OKX also withdrew its application for a Hong Kong VASP license. In an official statement on its website, OKX asked customers to withdraw their funds. The company specified it would suspend centralized trading services to Hong Kong users from May 31.
According to the SFC’s website, only OSL Digital Securities and Hash Blockchain are licensed to operate the OSL Exchange and HashKey Exchange, respectively. The website also reveals that 11 entities have had their applications denied, returned, or withdrawn. Also, the page has no entities included in its list of platforms that are deemed to be licensed. The SFC may update these lists, clarifying the number of deemed-to-be-licensed entities on June 1.
Hong Kong ETF Market
The Hong Kong crypto market has been buzzing since the SFC launched six spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) at the end of April. Unfortunately, the spot exchange-traded products have struggled to maintain high momentum and recently experienced a net outflow of 519.5 BTC on Monday, May 13. It was a 420% increase from the 99.99 BTC outflow recorded the Friday before. Of the total May 13 outflow, ChinaAMC’s spot product lost 251.65 BTC, accounting for more than 48%. Harvest had the second largest outflow at 147.86 BTC, while Bosera HashKey lost 119.99 BTC.
The SFC is now considering allowing staking for ETH ETFs. According to reports, the Commission is in talks with crypto ETF issuers about permitting staking through licensed services. This could potentially expand access to increased income for investors, allowing people to earn passively. The regulatory approval will also put Hong Kong ahead of the US in this regard. So far, US authorities have not yet permitted staking for Ether ETFs.
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Hong Kong Authorities to Inspect Physical Locations of Crypto Platforms to Ensure Compliance