Several exchanges have withdrawn their cryptocurrency license applications, and after actual testing and registration status, Hong Kong users can still register on unlicensed platforms, causing unfair competition for compliant exchanges operating in Hong Kong.
Investigation results on international large exchanges
Amidst the increasingly strict regulation of the cryptocurrency market in Hong Kong, I conducted an in-depth investigation into the actual operations of major trading platforms. The results show that even under regulatory restrictions, some international large exchanges are still actively operating in Hong Kong, posing significant challenges to fair competition in the Hong Kong cryptocurrency market.
Regulations and current situation of the Securities and Futures Commission in Hong Kong
On May 31, 2024, the Securities and Futures Commission announced that all virtual asset trading platforms operating in Hong Kong or providing services to Hong Kong residents must obtain a license within a specified period. This measure aims to ensure that all trading platforms operate under fair and transparent conditions and strictly comply with relevant anti-money laundering and counter-terrorism financing laws and regulations.
According to the Securities and Futures Commission website, only two exchanges, OSL Exchange and HashKey Exchange, have obtained licenses.
List of exchanges that have withdrawn their license applications include well-known platforms such as OKX, Bybit, and Gate.
Testing results
In my actual testing in Hong Kong, it was shown that new user registrations can still be done using Hong Kong phone numbers. Some unlicensed trading platforms can still be registered in Hong Kong, and even bypass Hong Kong IP restrictions by using VPN.
Market unfair competition issues
Such situations have made compliant exchanges like OSL and HashKey feel the unfair competition in the market, as they have invested a significant amount of resources to comply with the strict regulatory standards of the Securities and Futures Commission in Hong Kong. This not only weakens the business interests of legitimate operating exchanges but also damages market order.
Legal expert Yu Peiheng previously pointed out that there are two major consequences for unlicensed platforms operating in Hong Kong: first, unlicensed platforms are not allowed to conduct business in Hong Kong. The definition of “business” may include having office space in Hong Kong, having key employees or management, etc. The second consequence is that unlicensed platforms are not allowed to actively promote their platform to the people of Hong Kong. However, if Hong Kong residents open accounts and trade on overseas exchanges by themselves, “it cannot be legally prohibited.”
The current regulatory and enforcement gap between licensed and unlicensed trading platforms allows unlicensed platforms to easily bypass regulatory requirements and continue to operate in Hong Kong. This puts compliant licensed exchanges at a disadvantage, reflecting the situation where “honest people suffer.”
Related reports
Major! Taiwan Mobile Lin Zhi Chen enters the cryptocurrency exchange, becoming the 26th VASP operator
Sony enters the cryptocurrency exchange! Acquires Amber Japan and renames it “S.BLOX” to expand the Web3 landscape
Bloomberg: Standard Chartered Bank is setting up a “cryptocurrency exchange” to trade Bitcoin and Ethereum spot in London.