Four new members have been added to Hong Kong's virtual asset exchanges, a quick overview of each company's background and latest regulatory roadmap.

Article reprinted from: Nancy

Author: Nancy, PANews

After OSL Exchange, HashKeyExchange, and HKVAX, Hong Kong's licensed virtual asset trading platform (VATP) welcomes four new members. On December 18, the Hong Kong SFC announced that it had issued licenses to four virtual asset trading platforms under the 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.

Meanwhile, the Hong Kong Securities and Futures Commission (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 footprint in the Web3 field.

Four platforms received licenses from the Hong Kong SFC

This time, the Hong Kong SFC approved four platforms at once, increasing the number of licensed virtual asset trading platforms in Hong Kong to seven.

HKbitEX: Launched by a former Hong Kong Stock Exchange official, has secured tens of millions of dollars in financing

HKbitEX, launched by Hong Kong Digital Asset Trading Group Limited, was established in 2019 and is committed to providing compliant and regulated digital asset spot trading and over-the-counter (OTC) trading platforms for global professional investors.

It is reported that the parent company behind the Hong Kong Digital Asset Trading Group is Taiji Capital Group, which mainly provides tokenized asset services, including capital markets and wealth management, digital asset exchanges, and Web3 SaaS and technology R&D. In September 2023, Taiji Capital announced the launch of Hong Kong's first real estate fund security token offering (STO), issued by its subsidiary Pioneer Asset Management's closed-end fund token PRINCE, aiming to raise approximately HKD 100 million. The founder of Taiji Capital, Gao Han, previously worked at the Hong Kong Stock Exchange, mainly responsible for promoting the Hong Kong Stock Exchange's products in mainland China, including Stock Connect and Bond Connect, etc., and Taiji Capital has also attracted several senior executives from the Hong Kong Stock Exchange.

As one of the first institutions to apply for a virtual asset trading platform license from the Hong Kong SFC, HKbitEX has undergone multiple rounds of financing, including in December 2020, when HKbitEX announced the completion of a $10 million Series A2 financing round, led by Axion Global Investment Limited, a subsidiary of the Hong Kong-listed company Anling International, along with other investors such as De Ding Innovation Fund, Jianfeng Capital Management, Lenovo Ventures, and Lingfeng Capital; in November 2021, HKbitEX announced the completion of a $9 million Pre-B round financing totaling $300 million.

Accumulus: Backed by a top 500 Chinese enterprise

The virtual asset trading platform Accumulus was launched by Cloud Account Greater Bay Area Technology (Hong Kong) Limited and went live in Hong Kong in April 2023, officially submitting its virtual asset trading platform license application 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 external direct investment quota of RMB 985 million approved by the National Development and Reform Commission and others, supporting Cloud Account Hong Kong to focus on expanding its business in Web 3.0. According to official introductions, Cloud Account is China's largest online human resources service enterprise, serving 110 million new employment-type 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 this year.

DFX Labs: Team has years of blockchain industry experience

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 extensive experience in 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 Chairman of IEEE Hong Kong, and Chief Technology Officer David H. has worked for Morgan Stanley, Dell Technologies, and HashKey Group.

EX.IO: Internet brokerage under Sina as the main investor

EX.IO (formerly known as xWhale), launched by Thousand Whales Technology (BVI) Limited, is the first and only licensed institution in Hong Kong with a broker background, primarily funded by Huasheng Capital Group, an internet brokerage under Sina, 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 last May.

Release licensing procedure six-step roadmap, advisory group to be established early next year

Despite Hong Kong's strong determination to develop Web3, which has attracted many cryptocurrency 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 applicants for licenses, and the challenges faced by Hong Kong cannot be ignored.

To enhance approval efficiency and ensure compliance, Hong Kong launched an inspection program in June this year, completing relevant on-site inspections for all licensed applicants, achieving direct results. Therefore, the Hong Kong SFC decided to continue this practice when appointing external evaluation experts for the second phase evaluation of virtual asset trading platforms.

The SFC has been actively communicating with the senior management and ultimate controllers of virtual asset trading platforms, which helps us clarify the regulatory standards that need to be met and expedite the regulatory standards for virtual asset trading platforms,” said Yip Chi-hang, Executive Director of the Intermediaries Division of the SFC.

In the latest circular, the Hong Kong SFC has also formulated a clear roadmap for the licensing procedures for virtual asset trading platforms:

1. On-site inspections and suggestions, requiring the platform to submit a corrective action plan.

2. After reaching a consensus on the corrective plan, a conditional license will be granted, and the platform will continue to complete corrective actions according to the plan, conduct penetration testing and vulnerability assessments, and obtain satisfactory results before it can operate within a restricted business scope.

3. Penetration testing and vulnerability assessments should be conducted by an independent third party, and the platform's management should ensure that all important and critical corrective actions continue to be taken.

4. The platform may be allowed to operate with a license in a restricted business scope after completing the corrective actions, vulnerability assessments, and testing.

5. The platform must hire external experts to evaluate the revised policies and procedures (including revised procedures and monitoring), and the SFC will oversee the entire second phase evaluation process to clarify regulatory requirements and provide opinions on the evaluation results.

6. The SFC will revoke the licensing conditions related to the restricted business scope after completing 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 appropriately designed and implemented and conducted through direct verification.

We are striving to regulate this emerging market, but this is no easy task as it is a large existing market with advanced technology, no borders, and imperfect regulations. The SFC will establish a formal advisory group for all licensed platforms at the beginning of 2025, and each licensed institution will appoint senior personnel to serve as representatives. This will enable the SFC to fully hear and consider their views. It will allow us to pool ideas and systematically prioritize development matters based on investor protection,” Yip Chi-hang previously revealed. The SFC also disclosed that it will provide more guidance on licensing plans for new organizations applying to operate a second virtual asset trading platform license at the beginning of 2025.