For the Hong Kong virtual asset market, the most important part in 2023 must be the implementation of the licensing system for virtual asset trading platforms.
Whether it is Bitcoin or other virtual assets, trading is always its most important application scenario.The global market has always regarded compliant exchanges as one of the key regulatory focuses. Countries such as the United States, Canada, and South Korea have long introduced compliant exchange operating systems to regulate the development of the virtual asset market.
There is no doubt that Hong Kong is determined to build the world's Web3.0 financial center. If it wants to quickly catch up with the global market, its first priority is to launch a compliant virtual asset trading platform to provide the most basic guarantees.
In December 2022, the Hong Kong Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 12;On June 2023, 6, a new licensing system specifically for central virtual asset trading platforms (virtual asset trading platforms) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance will come into effect.Hong Kong's virtual asset trading platform has entered the compliance era.
OSL and Hashkey have already obtained compliance licenses, are ahead in progress, and are vigorously expanding their business; 12 institutions followed closely behind as license applicants, vowing to carve out their own space in the Hong Kong virtual asset market.
This article analyzes the latest developments of OSL, Hashkey, and 12 virtual asset license applicants for readers, giving them a full picture of the battle among virtual asset trading platforms in Hong Kong.
1. OSL and Hashkey take the lead
When talking about Hong Kong's compliant virtual asset trading platform, the names of OSL and Hashkey are naturally inevitable.On August 2023, 8, the two platforms announced on the same day that they had obtained approval from the China Securities Regulatory Commission to complete the license upgrade and could provide virtual asset trading services to retail customers.Compliant exchanges have officially entered the era of retail investors.
O.S.L.
OSL has been operating at a loss in the Hong Kong virtual asset market for many years. In 2023, its overall business operations finally got back on track.
In the second half of the year, Hong Kong's virtual asset policies were implemented one after another; then in October, the US Bitcoin spot ETF was approved and expected to trigger a bull market. OSL, which has been planning for a long time, finally waited for a good opportunity and reached cooperation with Harvest International, Huaying Securities, Interactive Brokers, Mulan Asset Management and other institutions to enhance OSL's position in the Hong Kong virtual asset market.
For OSL, policy changes also prompted OSL to change its blood to adapt to market development. On November 2023, 11, OSL announced on its official website that it had received a strategic investment of approximately HK$14 million from BGX Group. BGX held 7.1% of the shares, becoming OSL's largest shareholder (the original BC Technology Group has been renamed). Bitget finally entered the Hong Kong virtual asset market in compliance with its own regulations.
On January 2024, 1, the transaction between BGX and OSL was completed. Subsequently, the board of directors was reorganized and Pan Zhiyong, currently the CEO of BGX, was appointed as the new chairman and CEO.
In 2024, with the US SEC approving the listing of Bitcoin spot ETFs, a wave of capital from institutional investors is likely to enter the virtual asset industry to further consolidate its role in the traditional financial industry. After taking over, Pan Zhiyong identified four strategic pillars for OSL in 2024: global expansion, service innovation, digital financial collaboration and compliance standards, hoping to make good use of OSL's existing compliance and technical advantages to achieve results.
Everyone is waiting to see whether OSL can seize the opportunities brought by these developments this time.
Hashkey
Hashkey still maintains its leading position in the Hong Kong virtual asset market.
Four months after its launch, Hashkey Exchange has more than 4 users and an average daily trading volume of US$15 million. Currently, 6.3 virtual assets are supported for trading on the platform. Currently, more than 18 brokerage fund comprehensive accounts have been opened, and cooperation has been carried out with more than 10 institutions. Six Hong Kong-listed companies: Shengyang Group, Hushi Media, Yangke Group, Xinhuo Technology, Blueport Interactive, and Huake Smart Investment have chosen to open accounts with Hashkey.
In addition, the insurance platform OneDegree officially provided Hashkey Exchange with insurance covering cold and hot wallets in November 2023. Hashkey has reached a cooperation with China Asset Management and Hamsa to jointly explore tokenized product innovation.
On January 2024, 1, Hashkey Group completed a nearly $16 million Series A financing with a valuation of more than $12 billion. New investors included large institutional investors, Web3 institutions and strategic partners.
Hashkey and its leader, Dr. Xiao Feng, have always been advocates and promoters of the principle of compliance first. It is not surprising that Hashkey has taken the lead in the context of Hong Kong's compliance.
However, in the global trend towards compliance, crypto unicorns such as Binance and OKX are also gradually embracing regulation and embarking on the path of compliance.When these powerful institutions and Hashkey step onto the same compliance starting line, what strategies will Hashkey use to deal with the challenges from them? It is worth looking forward to.
(II) 12 applicants followed closely behind
OSL and Hashkey still need to continue to defend their already achieved positions. After them, senior Web3 teams, traditional financial institutions, and pioneers in other industries have entered the market to compete for a piece of the Hong Kong virtual asset business.
HKVAX
On August 2023, 8, HKVAX received an in-principle approval notice from the Hong Kong Securities and Futures Commission, allowing it to conduct Type 11 and Type 1 regulated activities (virtual asset licenses 7&XNUMX), and will become the third licensed virtual asset trading platform in Hong Kong.At the end of 2023, HKVAX conducted a strategic fundraising and expressed its intention to apply for a VASP license.
According to public information, HKVAX CEO Wu Weiliang was previously the CEO of CoinSuper Premium, a crypto asset trading platform under the Hong Kong traditional financial group Pioneer Group. Prior to CoinSuper, CEO Wu Weiliang had worked with top financial institutions including Morgan Stanley, JPMorgan Chase and Wanfang Asset Management, and served as the managing director of CITIC Futures International Department.
▲ From left to right: Operations Director Fok Siu-leung and Chief Executive Officer Ng Wai-leung
In January 2024, HKVAX CEO Wu Weiliang attended the "1 Qingdao Hong Kong and Macao Financial Night Event", where he shared the opportunities and challenges for Qingdao companies in developing virtual asset businesses.
Wu Weiliang said: "There are 'exclusive' blockchains in China, such as Wenchang Chain, Wuhan Chain and Ant Chain, which are very different from Ethereum, a blockchain used overseas. Therefore, from a technical point of view, Hong Kong is the preferred platform for enterprises to develop virtual assets. Hong Kong supports all 'chains'. If we link some domestic digital assets to Hong Kong through some domestic 'chains', such as Ant Chain, and then change the relevant underlying layer to Ethereum in Hong Kong and sell it to overseas companies, we can solve all problems, whether they are technical or legal issues, and use Hong Kong as a bridge to connect some domestic businesses as products with overseas."
It is worth paying attention to whether HKVAX will be able to fulfill this bridge mission.
VDX
VDX, Victory Fintech Limited, is a joint-stock company of Victory Securities, a local brokerage firm in Hong Kong. Its core strategic positioning is to be a virtual asset trading platform focusing on 2B business.
Victory Securities is the first local brokerage firm in Hong Kong to obtain virtual asset licenses No. 1, 4 and 9.Become one of the winners after the implementation of Hong Kong’s new virtual asset policy in 2023.On November 2023, 11, Victory Securities became the first local securities firm in Hong Kong to be approved to conduct virtual asset retail business.The current average monthly turnover is US$1000 million, and its virtual asset business has achieved profitability.
VDX CEO comes from the traditional financial circle, with more than ten years of high-frequency trading experience and seven years of experience in the virtual asset industry; COO has worked at Deutsche Bank and Accenture, and was previously an expert in virtual assets at the Hong Kong Securities Regulatory Commission. Many team members are from Tencent, Futu and Tiger Brokers.
Compared with other virtual asset trading platforms, VDX is expanding its business in a more entrepreneurial way. VDX's business is mainly focused on providing Web3 technology and liquidity solutions to partner financial institutions, and making ecological layout in the native Web3 industry fund.
Victory Securities has been making great strides on the front line, and I believe VDX will have new moves in 2024.
BGE
Hong Kong BGE Limited is a wholly-owned subsidiary of HKE Holdings, a Hong Kong listed company.Lian Haomin, Chairman of the Board of Directors of HKE Holding, is the founder of Monmonkey Group Holdings Limited ("Monmonkey Group"), also known as the Monkey King Group, and holds Hong Kong's traditional financial licenses No. 1, 4 and 9.
▲ Lian Haomin, born in 1992
After graduating from a US university in 2017 and returning to Hong Kong, Lian Haomin worked and interned at institutions such as JP Morgan and China Taiping Group. He later discovered that the financial business of the family business was losing money, so he asked his father to manage it himself. It happened that giants such as Xiaomi, Meituan and Alibaba were going public in Hong Kong at the time. After Lian Haomin took charge of the family's Dasheng Group, he invested in Hong Kong stock IPO projects and secondary market projects, making the company profitable. Until 2021, he fell on Evergrande RV Bao.
On January 2024, 1, according to Sing Tao Daily, Lian Haomin has invested tens of millions of dollars in blockchain-related projects in the past three years. After completing the acquisition of HKE Holdings in 8, the HKE virtual asset exchange team has exceeded 3 people, and its exchanges,That is, BGE may officially obtain the virtual asset trading platform license from the China Securities Regulatory Commission as early as the first quarter of this year.After obtaining the license, the company plans to expand its business to Southeast Asia.
HKbitEX
HKbitEX is one of the four major business units of Tykhe Capital, Tykhe Capital Group. The core business of Tykhe Capital includes digital asset trading, capital market and wealth management, digital asset custody and technology research and development. On September 2023, 9, Tykhe Capital launched the PRINCE token, which is the first real estate STO for "professional investors" in Hong Kong and the first fund tokenization fundraising model approved by the Hong Kong Securities and Futures Commission.
Founder and CEO Gao Han once worked at the Hong Kong Stock Exchange and participated in the Hong Kong Stock Connect and Bond Connect.A number of former employees of the Hong Kong Stock Exchange have also joined the platform, forming the regular team of the Hong Kong Stock Exchange.
▲ Gao Han, founder of HKbitEX
In December 2023, HKbitEX signed a strategic cooperation agreement with the Shanghai Technology Exchange, which was jointly established by the Ministry of Science and Technology and the Shanghai Municipal People's Government. According to the memorandum, the Shanghai Technology Exchange will work with HKbitEX to explore financial solutions for science and technology companies based on asset tokenization, including problems such as the mismatch between financing demand and capital supply, valuation difficulties, and imperfect investment exit mechanisms.
It is expected that in 2024, HKbitEX will make more attempts in RWA with more partners.
Meex
On October 2023, 10, Meex Digital Securities Limited submitted an application for a virtual asset trading platform license to the Hong Kong Securities Regulatory Commission, joining the Hong Kong battle as a representative of the senior Web12 team.
Meex is backed by a Hong Kong consortium and focuses on asset security.Customer assets are independently managed by Meex Custody Services Limited, a TCSP licensed company.We are currently applying for virtual asset No. 1, No. 7 and VASP licenses.
Meex co-founder Simon Wu was formerly Huobi’s Chief Security Officer and Huobi Technology CSO & CEO;Vince Lam, the head of operations, was previously the head of operations for HKbitEX, an exchange that is also applying for a license. Other team members include people licensed by the Hong Kong Securities and Futures Commission and legal professionals.
ZhongAn International, Huawei Cloud Hong Kong and others are now strategic partners of Meex. How Meex, with its senior background in Web3, plays this card well in Hong Kong remains to be seen.
PantherTrade
Panthertrade (Hong Kong) Limited, also known as Cheetah Trading (Hong Kong) Limited in Chinese, submitted an application for a virtual asset trading platform on November 2023, 11. According to people familiar with the matter, Cheetah Trading (Hong Kong) Limited is a wholly-owned subsidiary of Futu Securities, and is another strong foray by traditional securities firms into the virtual asset market.
On March 2023, 3, Panthertrade submitted the incorporation form. The first director was Fang Xingzhi, who had worked at JD Securities Co., Ltd. On September 7, 2023, PantherTrade appointed Chen Zhihu as a director. Chen Zhihu was the investment director of Huobi Asset Management (Hong Kong) Co., Ltd.; the other director was Hong Yimin.
As early as 2021, Futu Securities has begun to expand its layout in the crypto industry. In April 2021, on the Futu NiuNiu platform, a user asked Futu Securities CEO Li Hua whether Bitcoin can be traded on the platform in the future. Li Hua replied: "Hong Kong and overseas customers are likely to be able to, but inland customers should not be able to."
However, due to regulatory requirements at the time, trading of stocks such as GBTC and EHTE was forced to be suspended. The regulatory environment for returning to the Hong Kong virtual asset market this time is completely different. Whether Futu Securities has made sufficient preparations during the years of waiting will soon have an answer.
OK
Unlike other competitors, OKX's joining is more about sending two signals to everyone.First, the compliance of global virtual asset trading platforms has become a major trend; second, Hong Kong will inevitably be the center of global virtual asset market activities in the future.
In 2023, Binance and CZ compromised with the US SEC and paid a huge fine. The first unicorn in the crypto industry chose to embrace regulation, which has proved that compliance is an irreversible fact for anyone. For a leading exchange like OKX, choosing to complete compliance as soon as possible is undoubtedly the best choice.
On January 2024, 1, OKX Middle East Affiliate (OKX Middle East) was officially issued a Virtual Asset Service Provider (VASP) license by the Dubai Virtual Asset Regulatory Authority (VARA). The license will take effect after OKX Middle East meets all remaining conditions and specific localization requirements listed by VARA. At that time, OKX Middle East will officially start operations after the review and approval of the regulatory authorities.
OKX is moving steadily towards compliance, and it is only a matter of time before it arrives in Hong Kong.The market is concerned about what impact will OKX have after its official entry into Hong Kong? Will it abide by the responsibilities of an exchange, or will it bravely innovate and launch more products to lead the transformation of Hong Kong's virtual asset market?Looking forward to OKX’s early response.
VAEX
Similar to OKX, the establishment and license application of VAEX is also an initiative by established crypto exchanges to embrace compliance.
VAEX于2023年11月25日成为了第8位虚拟资产交易平台牌照申请者。早在2023年2月，KuCoin便于官方渠道宣称对VAEX进行技术支持。如今VAEX入局香港，某种意义上讲，就是KuCoin拥抱监管所采取的行动。
KuCoin Ventures, the investment arm of KuCoin, is also active in Hong Kong. In March 2023, the company led a $3 million investment in Hong Kong stablecoin issuer CNHC.
Three months later, the platform confirmed that it would tighten its compliance procedures by introducing mandatory KYC identity checks amid the changing regulatory environment in 2023. It can be predicted that if VAEX is successfully launched in Hong Kong, it will have more linkage with KuCoin and help KuCoin gain a foothold.
Accumulus
The addition of Accumulus represents another trend:Domestic traditional Internet companies and traditional enterprises can also choose to achieve broader business expansion through virtual assets and the Hong Kong market.
Accumulus Technology (Tianjin) Co., Ltd., a top 500 Chinese enterprise, was approved an overseas investment quota of more than HK$11 billion and registered Accumulus GBA Technology (Hongkong) Co., Ltd. in Hong Kong. On December 2023, 12, it formally submitted an application for a virtual asset trading platform license to the Hong Kong Securities and Futures Commission.
Cloud Account has been providing flexible employment services for 7 years and is now one of the largest online human resources service companies in China.It has provided flexible employment services to more than 120 million freelancers in 8,200 countries and regions around the world, with revenue exceeding HK$2022 billion in 1,100.
Chairman Yang Hui is a member of the National Committee of the Chinese People's Political Consultative Conference, a member of the Standing Committee of the All-China Federation of Industry and Commerce, a member of the Standing Committee of the 14th Tianjin CPPCC, Vice Chairman of the Tianjin Federation of Industry and Commerce, a member of the Standing Committee of the Tianjin Democratic National Construction Association, Vice Chairman of the Tianjin Jinshang Federation, a member of the Standing Committee of the Tianjin Binhai New Area People's Congress, and a member of the China Democratic National Construction Association.
Among all applicants for virtual asset trading platforms, the Accumulus team has the most unique background. Backed by mainland resources, Accumulus has special advantages in terms of capital and talent delivery. If it focuses on security for long-term construction, it may reap results; but on the other hand, mainland China, which has been isolated from the global virtual asset market for a long time, has obvious differences in technology and cognition with the world, and there is a great deal of uncertainty as to whether the platform and business can be recognized by the market.
But no matter what, I hope Accumulus can successfully take root in Hong Kong, and perhaps provide a strong boost to the development of Web3 in mainland China.
DFX Labs
DFX Labs Company Limited became the last applicant for a Hong Kong virtual asset trading platform license in 2023, submitting its application on December 2023, 12.
Simon Au Yeung, COO of DFX Labs, graduated from Wharton School of Business. Previously, he served as CEO of Blockchain Finance and BGE. After leaving BGE, he co-founded IEEE and joined DFX Labs in September 2023.
The DFX official website is in trial operation and will support BTC and ETH transactions.
HKVAEX
HKVAEX was established in December 2022 and launched its virtual asset trading platform in 12.
Stanley Fung is appointed as CEO of HKVAEX. Stanley Fung graduated from the University of Toronto. Before joining HKVAEX,He has served as the head of business at Xinhuo Technology Exchange and CEO of Huobi Hong Kong.
Earlier, the Hong Kong media South China Morning Post pointed out that there was a lot of evidence that HKVAEX was established by Binance for its layout in Hong Kong. But afterwards, Binance denied the news, saying that "HKVAEX" does not belong to any company under Binance.
In June 2023, HKVAEX participated in supporting the "Virtual Asset Index" and "Virtual Asset Exchange Rating" launched by HKVAC, providing third-party reference data for professional investors and the public to participate in market activities. In addition, the HKVAEX team actively participates in various exchange activities on virtual assets in Hong Kong, including InvestHK, Tencent Cloud, Cyberport Conference, etc.
Whether the extensive Web3 background and active market participation can help HKVAEX take root remains to be seen.
BitHarbour
The last applicant submitted an application on January 2024, 1. BitHarbour (Hong Kong) Limited, Chinese name 币风港（香港）有限公司, trading platform name BitHarbour. BitHarbour is also the applicant with the least public disclosure information.
However, in the BitHarbour service agreement, one of the clauses states that users must "agree that all investment operations conducted on CoinEx represent true investment intentions and unconditionally accept the potential risks and benefits of investment decisions." It is speculated that there is some kind of business connection between BitHarbour and CoinEx.
Conclusion
Generally speaking, Hong Kong virtual asset trading platforms can be divided into three categories:Experienced Web3 companies, traditional financial institutions, and determined Web3 innovative entrepreneurs.Veteran Web3 companies have obvious advantages, with rich experience and market knowledge; traditional financial institutions have huge potential capital and customer base; and entrepreneurs may still face many challenges.
We cannot predict who will win in the end. But no matter who the winner is, the fierce competition among virtual asset trading platforms has shown that:The future of the virtual asset market cannot be separated from Hong Kong.
Produced by | Bailu Living Room
Author｜Bowen