Why Major Crypto Exchanges Withdrew License Applications in Hong Kong
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Amidst Hong Kong’s new licensing regimes for crypto exchanges, Livio Weng, the CEO of Hashkey Exchange, has pointed out that Hong Kong’s financial regulator might have considered the user base from a ‘sensitive region’ during its review of license applications from certain international crypto exchanges.
Weng, however, in an interview with Block, revealed that he couldn’t elaborate on the “sensitive region,” which seemed to be a main focus in the negotiations between the Hong Kong Securities and Futures Commission (SFC) and the exchanges that have withdrawn their license applications.
Why did the exchanges withdraw?
Yat Siu, chairman of Animoca Brands, stated that it was hard to make a statement regarding why these exchanges withdrew license applications. He could not believe that any exchange wouldn’t want to do business in Hong Kong, given the higher awareness of the space, concentrated audience, and high liquidity.
During the negotiations, the SFC had asked all the applicants not to serve mainland Chinese users in any region, which would be difficult for some exchanges to comply with. OKX had tried to form an industry alliance by resisting the requirement but had failed. Many global exchanges, including OKX, Gate.io, and HTX, have withdrawn their license applications in Hong Kong. OKX had revealed plans to wind down its Hong Kong business by the end of August.
Regulatory Expectations
Angela Ang, a former official at the Monetary Authority of Singapore, believed it was common for regulators to require that their licensees not contravene the laws of another jurisdiction. She also explained another factor of being unable to meet the regulatory expectations for a license, where withdrawal could be better than an outright rejection.
A Hong Kong lawmaker, Duncan Chiu, also raised concerns over the excessively stringent regulations for crypto exchanges to obtain a license, criticizing that the rules have prevented major global exchanges from getting into Hong Kong, weakening market confidence.
In Hong Kong’s new licensing regime, the SFC now requires that after June 1st, all virtual asset trading platforms (VATPs) must be licensed or be deemed to be licensed applicants, in an attempt to enhance investor protection and market integrity.
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