The new cryptocurrency licensing regime in Hong Kong is costing applicants several million dollars. Only HashKey and OSL are fully licensed, while 17 companies have applied, and operating without a license is now a criminal offense. HashKey manages $500 million in assets and has expanded globally following the collapse of JPEX.
Applicants seeking cryptocurrency exchange licenses in Hong Kong face costs of several million dollars, significantly less than the $25 million reported last year. Livio Weng, COO of HashKey Group, explained in an interview with the Financial Times that these costs vary between the preparation of review materials and operational requirements.
Weng emphasized that obtaining crypto exchange licenses does not necessarily cost tens of millions of dollars but does amount to several million USD, equivalent to tens of millions in Hong Kong dollars.
“For HashKey, already operational, our investment in the entire exchange sector already amounts to tens of millions of dollars, but this is not expected to be as much for a platform still in the licensing stage,” said Livio Weng, COO of HashKey Group.
Hong Kong Enforces New Crypto Exchange Licensing Rules
As of June 1, 2024, Hong Kong has imposed a new licensing system for cryptocurrency exchanges. The Securities and Futures Commission (SFC) now requires all Virtual Asset Trading Platforms (VATPs) to be licensed or to apply for a license. This regulatory change aims to enhance investor protection and market integrity.
The financial regulator stressed that operating without a license constitutes a criminal offense. Currently, only HashKey and OSL Digital Securities Ltd. (OSL Exchange) are fully licensed. Seventeen other companies, including Hong Kong BGE Ltd., Hong Kong Digital Asset EX Ltd., and Hong Kong Virtual Asset Exchange Ltd., are in the process of applying. The SFC urged investors to verify the licensing status of trading platforms to avoid the risks associated with unlicensed operations.
HashKey Reports Growth and International Expansion
Weng reported that since its launch, HashKey has managed $500 million in user assets and facilitated $440 billion in cumulative trades. The exchange has seen increased customer activity, with newly activated clients rising by 267% over the past week. HashKey has also expanded its operations internationally by establishing a global exchange in Bermuda, which serves international users but excludes regions like Hong Kong, China, and the United States.
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The introduction of the new licensing system follows the collapse of the unlicensed JPEX exchange, which defrauded investors of $166 million in 2023. This incident heightened skepticism among Hong Kong residents towards cryptocurrency investments. In response to the new regulations, several exchanges, including OKX and Gate.hk, have withdrawn from the Hong Kong market.
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