Hong Kong's Crypto Exchanges Face Licensing Challenges Amid Inspection Concerns

Hong Kong's ambitions to establish itself as a leading digital-asset hub are encountering obstacles as 11 crypto exchanges face uncertainty over obtaining full licenses. These exchanges had received initial approvals earlier this year, but recent inspections by the Securities and Futures Commission (SFC) have raised several issues.

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According to sources familiar with the matter, some of the "deemed-to-be-licensed" platforms have been found lacking in critical areas. Issues include an over-reliance on a few executives for managing client asset custody and insufficient measures to protect against cybercrime risks. The specific exchanges that did not meet the SFC's standards have not been disclosed, and the inspections are ongoing.

The 11 platforms under review include well-known international entities like Crypto.com and Bullish, as well as Hong Kong-based exchanges such as HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin, and Matrixport HK.

The SFC has noted that companies operating before the licensing regime were allowed to continue while applying for a license, but those that did not apply had to exit the market by the end of May. To date, 12 companies, including Huobi HK, OKX, and VAEX, have withdrawn their applications.