David Edwards
Hong Kong’s Securities and Futures Commission (SFC) announced plans to authorize additional cryptocurrency exchange licenses before the year ends, emphasizing strict compliance standards. The regulatory body issued a licensing framework requiring exchanges to meet benchmarks on anti-money laundering (AML) measures, investor protections, and secure asset custody.
Following an extensive five-month inspection, the SFC noted that some digital asset companies lacked sufficient safeguards, particularly in asset custody protocols. As a result, only three exchanges—OSL, Hashkey, and HKVAX—received full licensing, while 11 others, including Crypto.com, were granted tentative approvals contingent on compliance improvements.
Dr. Eric Yip, Executive Director of Intermediaries at the SFC, highlighted the importance of regulatory feedback, saying exchanges valued the audit insights for business development. Yip underscored that regulatory diligence will enhance compliance and overall market stability, promoting broader adoption of digital assets within secure legal frameworks.
Hong Kong’s evolving approach to crypto regulation marks a shift from past reservations over digital asset volatility and security concerns. Following a high-profile fraud incident with the unlicensed exchange JPEX, which impacted 2,600 investors with losses of $105 million, Hong Kong intensified efforts to protect investors. Since then, the SFC has spearheaded a comprehensive regulatory framework, further establishing the city as a cryptocurrency hub and the first in Asia to launch crypto ETFs shortly after their debut in the United States.
