HKVAX has been approved, and the Hong Kong crypto market has reached the Next Level!

Article written by: Callan Quinn

Source: CoinDesk

Article translation: Echo, MetaEra

Hong Kong Virtual Asset Exchange (HKVAX) announced on October 4 that it has been granted Type 1 (dealing in securities) and Type 7 (providing automated trading services) licenses by the Hong Kong Securities and Futures Commission (SFC), and a virtual asset trading platform license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). This makes HKVAX the third licensed virtual asset trading platform in Hong Kong after OSL Exchange and HashKey Exchange. The licenses held by HashKey and OSL are upgraded from the licenses they held under the previous regulatory regime. CoinDesk's parent company Bullish has also applied for a license.

The Hong Kong Securities and Futures Commission (SFC) plans to approve more cryptocurrency exchanges to operate in Hong Kong by the end of this year, according to Leung Fung-yee, CEO of the SFC. There are currently several virtual asset trading platforms applying for licenses, which are considered "licensed applicants". Among them, the 11 platforms that have undergone on-site review include HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, etc. However, the SFC did not respond to clarify how many platforms have applied. One page on its website lists 11 platforms that have applied for the licensing system, while another page lists 16 platforms.

Ms. Liang said in an interview with local media HK01 on October 6 that the 11 platforms that have applied for licenses have been subject to on-site review. She expects that by the end of this year, the SFC will have new progress, and some applicants who meet the requirements may be issued licenses in batches, while those who do not meet the requirements will lose their qualifications.

The promise of future approval follows criticism that Hong Kong’s current regime is too restrictive and could harm the city’s goal of becoming a hub for cryptocurrency and Web 3.0.

In August, a report showed that regulators found "unsatisfactory practices" at some exchanges. In particular, the report pointed out that "some cryptocurrency companies rely too much on a small number of executives to oversee the custody of customer assets, while others do not properly protect against cybercrime risks."

Although Hong Kong legislator Goh Chok Tong personally invited Coinbase to set up an exchange in Hong Kong, other international companies withdrew their applications due to the failure to receive applications from large companies such as Coinbase. (Crypto.com is an exception and it is still on the application list.)

The exchanges that withdrew included OKX and Bybit, both of which cancelled their applications in May without disclosing the reasons. (South China Morning Post) One of the main factors may be that the Hong Kong Securities Regulatory Commission notified them that they must prevent mainland residents from using their services.

Shortly after OKX withdrew its application, Hong Kong legislator Darren Chiu warned in a commentary published in Hong Kong Economic Times that the approval conditions borrowed concepts from traditional finance, which he believed were too strict and inappropriate for Web 3.0. He added that the remaining applicants had the problem of being "small in scale."

Meanwhile, the SFC has also borne the brunt of criticism when lawmakers say exchanges have disadvantaged Hong Kongers. Last year, the SFC came under fire for the collapse of JPEX, a rogue exchange that caused more than 2,600 Hong Kongers to lose about $200 million. Police arrested more than 70 people in their investigation of the exchange, but no one has been charged so far.

The collapse of JPEX led the SFC to change the way it shares information about exchanges with the public. The changes included the SFC starting to publish a list of companies that had applied for licenses (which they had previously refused to disclose) and listing suspicious platforms on its website.

In addition to JPEX, several OTC cryptocurrency trading storefront chains associated with it have also been raided and closed by the police, sparking calls for regulation of OTC trading. Liang said the Hong Kong Securities and Futures Commission has also been seeking industry opinions on "licensing of cryptocurrency OTC trading and custody services."