Cryptocurrency exchanges operating in Hong Kong are facing a deadline of February 29 to apply for a virtual asset trading platform (VATP) license from the Hong Kong Securities and Futures Commission (SFC). Failure to obtain this license could result in the liquidation of their operations and their exit from the region within three months, according to regulatory requirements.
As of February 26, a total of 18 cryptocurrency exchanges have submitted applications for registration with the Securities and Futures Commission. Among these applicants are well-known platforms such as OKX, Bybit, Crypto.com, and the Binance-affiliated HKVAX. However, four applications have been withdrawn since the licensing regime opened in August 2023. Notably, Huobi Hong Kong, the local subsidiary of cryptocurrency exchange Huobi (now HTX), initially applied for a VATP license on February 20 but subsequently withdrew its application just three days later, without providing a specific reason for the withdrawal.
Once licensed, cryptocurrency exchanges in Hong Kong will be permitted to facilitate retail investors' trading of major cryptocurrencies like Bitcoin and Ethereum. The Securities and Futures Commission is currently reviewing various altcoins and stablecoins for potential trading approval. Presently, only OSL and HashKey have obtained Hong Kong VATP licenses. Exchanges that fail to meet VATP requirements are required to cease all operations by May 31, as reported by local news outlets. Similarly, exchanges whose VATP applications are rejected by the SEC must vacate the city within a three-month period.
Despite the regulatory clarity provided, unauthorized cryptocurrency exchanges continue to pose a challenge in Hong Kong. In 2023, the collapse of Hong Kong's two largest cryptocurrency exchanges, JPEX and Hounax, made headlines following allegations of operating Ponzi schemes. Investors suffered significant losses, with an estimated $180 million lost in the JPEX scandal and $18.9 million lost by 145 victims of the Hounax scam. Although authorities managed to freeze some funds linked to these exchanges, many investors were unable to recover their losses.
On February 26, yet another Hong Kong-based cryptocurrency exchange, BitForex, faced scrutiny after suspending user exchanges and withdrawing $56 million from its hot wallet the day prior. The exchange's lack of response to user inquiries has raised concerns, prompting an ongoing investigation into the matter.
