The Hong Kong Securities and Futures Commission (SFC) issued a circular on May 31, 2023, regarding the transitional arrangements for the Virtual Asset Trading Platform (VATP) licensing handbook and the licensing regime. The regime is effective from June 1, 2023, and provides a one-year transition period until June 1, 2024, for virtual asset trading platforms operating in Hong Kong to obtain licenses from the regulatory authority. Failure to obtain the license by the end of the transition period will result in the cessation of operations.
On March 28, 2024, HKVAEX, suspected to be a subsidiary of Binance, withdrew its license application. On May 14, IBTCEX, QuanXLab, and Huobi HK also withdrew their applications. On May 22, Gate HK withdrew its application, followed by OKX HK on May 24. On May 31, Bybit (Spark Fintech Limited) also withdrew its application. As of May 31, a total of 11 platforms have withdrawn or returned their license applications, leaving 17 platforms on the application list.
Exclusive information obtained by Wu Shuo reveals that the reason for the withdrawals is the Hong Kong SFC’s requirement for all virtual asset trading platform license applicants to sign a commitment letter, promising not to have mainland Chinese users in any region. This requirement has made it impossible for traditional offshore exchanges to comply. OKX attempted to form an industry alliance to oppose this requirement but ultimately failed.
However, industry insiders believe that the entities that have withdrawn their applications can reapply in the future after updating their legal entities or frameworks, but they may not be able to use similar branding as offshore exchanges currently do.
Currently, 11 platforms, including HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixincom, xWhale, YAX, Bullish, Cryptocom, WhaleFin, and Matrixport HK, are the applicants who have obtained licenses. Only OSL and HashKey have obtained formal licenses. PantherTrade is a subsidiary of Futu, a traditional internet brokerage company. Cloud Account is a financial and tax company based in Tianjin. Bixin is a traditional Chinese wallet and mining company that has shifted towards VC business. xWhale is a subsidiary of Huasheng Securities. Bullish is an exchange founded by EOS development company Blockone, which later acquired CoinDesk. Cryptocom is a large offshore cryptocurrency exchange known for its aggressive sponsorship of arenas. Whalefin’s parent company is Amber Group, which received investment from Temasek but was on the brink of bankruptcy during the previous bear market. Matrixport is a cryptocurrency wealth management company founded by Wu Jihan.
Author: Hong Kong Legislative Council member Tse Tat Kan
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