Hong Kong’s Crypto Hub Plans Hit by Regulatory Challenges

• SFC inspections reveal gaps in compliance, threatening Hong Kong’s crypto hub ambitions.
• Main exchanges face delays, with licenses in danger as a result of unmet regulatory requirements.
• JPEX incident raises SFC’s deal with defending consumer property and strict KYC enforcement.

Hong Kong’s crypto hub ambitions hit a snag as exchanges grapple with strict licensing necessities from the Securities and Futures Fee (SFC).

On-site inspections by the SFC have revealed shortcomings in some crypto platforms’ operations, elevating considerations in regards to the metropolis’s potential to determine itself as a number one digital asset middle.

Since June, when a number of crypto platforms acquired deemed-to-be-licensed standing, the SFC has been conducting inspections to make sure compliance with its laws.

Sources point out that some platforms have fallen wanting the SFC’s requirements in key areas like safeguarding consumer property and stopping cybercrime.

The reliance on a small group of executives to handle these important capabilities has been flagged as a major concern. The SFC’s inspections are ongoing, and findings might evolve, doubtlessly resulting in additional problems for the concerned platforms.

As well as, the SFC has but to reveal which exchanges have failed to satisfy its necessities, however the affect of those inspections is already being felt. The 11 exchanges below assessment embrace well-known names akin to Crypto.com, Bullish, and HKbitEX. These platforms have been prohibited from onboarding new purchasers till they safe full licenses. 

Furthermore, the SFC has warned that platforms that fail to repair the recognized points may lose their deemed-to-be-licensed standing or have their license functions denied. This might drive them to start out the applying course of over, inflicting additional delays to their operations.

The latest scandal involving JPEX, an unlicensed crypto platform that allegedly defrauded traders of HK$1.6 billion ($205 million), has elevated the urgency of those inspections.

The SFC acknowledged that full licenses, anticipated by the tip of 2024, will solely be issued to candidates who absolutely adjust to all laws, particularly these targeted on defending consumer property and making certain strict know-your-client procedures.