Thomas Daniels
The Hong Kong Securities and Futures Commission (SFC) will commence onsite inspections of cryptocurrency trading platforms seeking licensure as Virtual Asset Trading Platforms (VATPs) in the region.
In a May 28 announcement, the SFC highlighted the impending conclusion of the “non-contravention period” for VATPs operating in Hong Kong, set to end on June 1. The regulator emphasized that platforms “deemed-to-be-licensed” must undergo these inspections.
“The SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on their safeguarding of client assets and know-your-client processes,” the announcement detailed.
Platforms failing to meet compliance standards risk having their licenses denied and could face additional regulatory actions as deemed necessary by the SFC.
Currently, 18 entities are operating under the “deemed-to-be-licensed” status, a temporary classification until the completion of the licensing process. Post the June 1 deadline, any unlicensed platform offering services will be in direct violation of anti-money laundering and counter-terrorism financing laws.
The SFC clarified that these deemed-to-be-licensed VATP applicants are not formally licensed and, therefore, cannot market their services or onboard retail users. Should the SFC reject an application, the platform must submit a plan for the orderly winding down of its operations in Hong Kong, prioritizing client protection.
As of this writing, only two entities, OSL Digital Securities Limited and Hash Blockchain Limited, are fully licensed VATPs.
Some applicants have already withdrawn their applications due to non-compliance with Hong Kong’s stringent requirements. Recently, Gate.io’s Hong Kong branch retracted its application on May 22, followed by OKX on May 24, which subsequently ceased its services in Hong Kong.
These stringent licensing requirements come amid a rise in cryptocurrency-related scams in Hong Kong. In March, the SFC issued warnings regarding platforms impersonating the region’s two licensed entities, OSL Digital Securities Limited and Hash Blockchain Limited.\
