[Ming Pao News] The Securities and Futures Commission launched a new licensing system for virtual asset trading platforms (VATPs) on June 6 last year, with a transitional arrangement. VATPs that have been operating in Hong Kong must submit a license application on or before Thursday (1th), otherwise they should end their business in an orderly manner before May 29st; if the license application of an existing trading platform fails, the platform must also end its Hong Kong business within 5 months. Currently, there are 31 VATP license applications awaiting approval (see table). Market participants expect that if VATPs that have been operating in Hong Kong do not apply for a license, they may turn to underground or overseas operations in the future. It is believed that more platforms will be licensed this year.
Ming Pao reporter Xiao Jiacong
As of last Friday, a total of 24 platforms submitted applications on the SFC website, of which only OSL Exchange and HashKey Exchange were approved to upgrade their original licenses in August last year; another three platforms including Ammbr, BitHarbour and Huobi HK withdrew their applications, and Meex’s application was returned by the SFC. There is still no progress on the applications of the remaining platforms, which means that after the JPEX incident, no VATP has been issued a license.
BitMEX and Huobi are not on the application list
Hong Kong is determined to become the world's Web3 center. The shareholders of virtual asset trading platforms that intend to provide services in Hong Kong have diverse backgrounds. For example, PantherTrade is a wholly-owned subsidiary of Futu Holdings (US: FUTU); YAX, which submitted its application in February this year, is a platform incubated by employees of Tiger Brokers (US: TIGR). In addition, according to CoinMarketCap data, the world's top three virtual currency spot exchanges are Binance, Coinbase (US: COIN) and Bybit, of which Bybit has submitted its application this month, and OKX, ranked fourth, is also on the application list; the market has reported that HKVAEX shares technology and legal resources with Binance, but Binance responded that HKVAEX does not belong to the group's company.
As for OSL's parent company OSL Group (0863), which has been licensed, it received a strategic investment of 11 million yuan from BGX Group in November last year. It is said that BGX is related to Bitget Exchange, and Bitget's Hong Kong subsidiary BitgetX.hk also announced in November last year that it decided to withdraw its application for Hong Kong VATP provider license and will cease operations. However, some platforms such as BitMEX and Huobi said last year that they would apply for licenses in Hong Kong, but so far, they have not appeared on the application list.
Unlicensed companies may turn to overseas underground operations
An industry insider said that applicants for the VATP license include exchanges that already hold No. 1 and No. 7 licenses. There are many companies in the market that operate virtual asset over-the-counter (OTC) transactions, such as virtual currency exchange shops, and the Financial Services and the Treasury Bureau has also previously launched a consultation on the inclusion of virtual asset OTCs in regulation. The insider expects that after the expiration of the transition period, if the platforms that originally operated in Hong Kong have not submitted an application, in addition to ending their business in Hong Kong, they may also switch to overseas or even underground operations.
Lu Zhihong, managing partner of Deloitte China Digital Assets Hong Kong, believes that each application is different, and the speed depends on whether the information submitted by the company meets the requirements of the Securities and Futures Commission. He believes that the speed of licensing will be "fast or slow", but it is expected that more platforms will be issued licenses this year. He also pointed out that it is not possible to generalize whether other platforms that have not applied for licenses will withdraw from the Hong Kong market, but after improving supervision, it is believed that more new funds can be attracted and investors will be more protected.