The Hong Kong Securities Futures Commission (SFC) is expected to issue more licenses to cryptocurrency exchanges before the end of this year, which will increase efforts to develop the regulatory framework for the sector in the region.
In an interview with the local media HK01 on October 6, SFC CEO Julia Leung said that expanding the virtual asset trading platforms (VATPs) into the regulated environment in Hong Kong is part of the system plan.
Currently, 16 companies are awaiting decisions on their applications to become licensed VATPs. Of these, 11 have undergone on-site reviews by the SFC, a critical step towards ensuring compliance with existing regulations.
Leung emphasized that the licensing process would continue in batches to streamline the integration of crypto exchanges into the regulatory framework.
The recent criticisms over the existing approach used in licensing businesses in Hong Kong suggest that the approach is overly restrictive, which might have informed the SFC decision to intensify the licensing activities.
This has prompted some of the leading global-based firms dealing with cryptocurrencies to avoid setting up their offices in the city.
However, SFC still argues that it is necessary to execute stringent and proper mechanisms to regulate risks such as internet fraud and managing customer funds with digital asset exchanges.
The recent approval of HKVAX’s license, making it the third officially sanctioned crypto exchange in Hong Kong after OSL and HashKey, reflects the SFC’s commitment to expanding the local crypto industry while ensuring investor protection.
This licensing push aligns with the SFC's newly released 2024-2026 roadmap, which outlines future regulatory plans, including advancing Real World Asset (RWA) tokenization and deeper exploration of blockchain technologies.
The SFC aims to finalize its regulatory framework for crypto assets by the end of next year. This development is expected to align Hong Kong’s standards with global practices concerning crypto OTC derivatives, particularly those in Europe. Such alignment underscores Hong Kong’s ambition to cement its status as a global cryptocurrency and fintech innovation hub.
The efforts to tighten regulations come after the $165 million JPEX scandal, underscoring the dangers of inadequate oversight in the burgeoning sector. The SFC has since intensified its scrutiny of crypto exchanges, establishing a task force with the police to tackle illicit activities and revising its guidelines on crypto sales and operational requirements.