The transition period for the issuance of licenses for virtual asset service providers (VASPs) in Hong Kong will end at the end of this month. The SFC will decide whether existing service providers can continue to operate after June until the authorities make a final decision on their license applications. As the period is approaching, several platforms have withdrawn their applications for Hong Kong licenses. OKX, the world's eighth largest trading volume, announced last Friday night that it had decided to withdraw its application after careful consideration of its business development prospects. The SFC website also showed that VAEX withdrew its application on the same day. Industry insiders believe that the liquidity and trading currencies of Hong Kong platforms are not as good as those overseas. After considering the costs of compliance, the platforms are not attractive enough to obtain licenses in Hong Kong.
OKX: Withdrawn due to business development prospects
According to the statistics website Statista, OKX ranked eighth in the world in terms of daily trading volume in early May. The OKX announcement stated that from May 5, it will stop providing centralized virtual asset trading services to Hong Kong users in accordance with regulations. The self-hosted wallet product service OKX Web5 will still provide services to Hong Kong users. From June, customers can no longer deposit funds and can only withdraw assets to self-hosted wallets or other third-party platform accounts. After August 31, it will not be possible to withdraw assets directly from the account. VAEX responded that due to changes in strategic plans, the platform will be suspended. Trading services will be stopped from May 3 and the platform will be temporarily closed from August 6, but no reopening time was mentioned.
The SFC will consider whether existing license applicants can meet regulatory requirements, whether they have substantial operations in Hong Kong before issuing licenses, and other factors to decide whether to temporarily consider them as licensed after June. If it is considered that they fail to meet the relevant requirements of the transitional arrangements, a notice of inappropriate license will be issued, and the platform must completely end its business within 6 months. This month, 3 platforms withdrew their applications for Hong Kong licenses, including Gate and Huobi, which are ranked ninth in the world. HKVAEX, which is suspected to have close ties with the largest platform Binance, withdrew its applications at the end of March. Industry insiders estimate that some platforms learned that their compliance levels did not meet the requirements and would not be licensed, so they withdrew their applications. The platforms may believe that Hong Kong's regulatory conditions are stricter and less attractive than other regions.
In May, a total of 5 platforms withdrew their applications
Currently, only two platforms have been licensed by the SFC, and 18 are applying, including the third largest platform Bybit and the XNUMXth largest Crypto.com. Xu Jiansheng, former chairman of the Hong Kong Computer Industry Association and convener of the WebX Industry Alliance, believes that the cost of operating a trading platform in Hong Kong is relatively high, such as license fees and hiring responsible personnel. The existing platform transactions in Hong Kong have not increased significantly, and the liquidity is not as good as that of overseas platforms, which has failed to attract overseas customers. In addition, the market may not be able to accommodate many license applicants. Large international platforms have mature overseas businesses or withdraw their applications due to profitability issues in the local market.
Industry: Strengthen the application of virtual asset tokenization
To promote the Hong Kong market, Xu Jiansheng believes that the industry can strengthen the application of virtual assets in the tokenization of real assets, so that the market knows that virtual currency is not just for speculation, increase acceptance and strengthen practical use. As for the current attitude of regulatory agencies towards virtual assets, he believes that the Securities and Futures Commission has approved the issuance of Ethereum spot ETFs and gold digital tokens earlier, which is intended to promote the development of the industry, but the industry is more conservative.