Hong Kong moves forward in becoming crypto hub with new exchange approvals

Hong Kong Securities and Futures Commission (SFC) has approved licenses for four virtual assets trading platforms (VATP) under its swift licensing process. The regulator announced this today, noting that it issued the license after completing on-site inspection of the firms.

According to the announcement, the four platforms approved as deemed to be licensed are Accumulus GBA Technology Co Ltd, DFX Labs Co Ltd, Hong Kong Digital Assets EX Ltd, and Thousand Whales Technology Ltd.

With these firms scaling the first hurdle in the application process, they can start operating within a restricted scope. However, the exchanges still have to complete rectification actions based on the inspection and pass the vulnerability assessment and penetration test.

The Director of Intermediaries at SFC, Dr Eric Yip, noted that the new approach seeks to expedite approving digital assets platforms in the city without compromising standards. Hong Kong has been trying to position itself as a crypto hub over the past few years.

Yip said:

“We aim to strike a balance between safeguarding the interests of investors and facilitating continuous development for the virtual asset ecosystem in Hong Kong.”

With the approval of these four firms, there are now seven licensed crypto exchanges in Hong Kong, including OSL, HKVAX, and HashKey, which got their approval earlier this year. Although some applications are still waiting for approval, the complexity of the process has already led several major exchanges, including OKX, to pull out. This is likely why the Hong Kong SFC is embracing the swift licensing process.

Exchanges still need to pass the second phase to get a full license

Meanwhile, the four exchanges still need to pass the second stage before obtaining their full license. To aid this process, SFC has amended the circular on the licensing for crypto exchanges by revamping the second phase. Under the new system, the Commission will focus on whether the exchange’s policies, procedures, systems, and controls meet regulatory standards and require the exchange to inform it of any changes.

Exchanges also have to get an assessment from a certified public accountant on whether all its policies and procedures meet the guidelines for VATPs and the anti-money laundering and counter-financing terrorism rules. The SFC plans to be involved in the assessment procedure by requiring a tripartite arrangement involving the exchange, the regulator, and the external assessor.

According to the SFC, this will expedite the process by enabling the regulator to engage the senior management and controllers of the exchanges directly. This approach has proven effective in getting the firms to meet the regulatory standards for the first phase, hence its continued adoption. After passing the second phase, all restrictions on the operation of the exchanges will be lifted.

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