Major exchanges including OKEx, Sesame, KuCoin, Binance and Huobi are withdrawing their Hong Kong license applications

Strict regulatory requirements and the inability to serve mainland investors are forcing most of the world's cryptocurrency exchanges to withdraw from Hong Kong. A year ago, several large companies set up shop in Hong Kong ahead of the introduction of new regulations, but eventually withdrew their license applications. The new regulations are aimed at transforming Hong Kong into a virtual asset hub.

Local branches of major mainland cryptocurrency exchanges including OKX, KuCoin, Binance and HTX (formerly Huobi) have all withdrawn their applications for Hong Kong Virtual Asset Trading Platform (VATP) licenses submitted in the past few months.

The companies, which were originally established locally and now have global operations, have shown interest in Hong Kong's new virtual asset regulatory regime, which came into effect in June last year, which requires exchanges to obtain a license in Hong Kong. Those with existing operations were given a one-year grace period, but those that withdrew their applications must now close their Hong Kong operations.

The strict requirements of the Securities and Futures Commission appear to have been one of the reasons for the companies' withdrawal, with seven of the original 24 applicants having withdrawn. However, the inability to serve mainland customers may be another major reason. In a notice, the Hong Kong Securities and Futures Commission reminded exchange operators that they must be "deemed to be licensed" by June 1 to continue operating in Hong Kong, and said virtual asset trading platforms must "comply with all applicable laws and regulations, including... preventing mainland residents from accessing any of their virtual asset-related services."

In 2021, the People's Bank of China warned that it would be illegal to provide cryptocurrency services to mainland people. Cryptocurrency investors who have managed to find workarounds are still important for many exchanges that have moved overseas.

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