Orhan 
The Hong Kong Securities and Futures Commission (SFC) aims to approve more licenses for cryptocurrency exchanges by the end of the year. SFC CEO Julia Leung stated that currently, 11 platforms are undergoing on-site inspections as part of the application process. This development is seen as a significant step in Hong Kong’s strategy to become a global crypto and Web3 hub.
The regulatory framework in Hong Kong has been rapidly taking shape in recent months. HKVAX, a local exchange, recently received regulatory approval, becoming the city’s third licensed exchange. Previously, HashKey and OSL had obtained similar licenses. These developments demonstrate Hong Kong’s commitment to increasing regulatory oversight in the crypto sector. However, these steps have also faced criticism due to the stringent rules imposed on crypto exchanges.
Challenges in Crypto Regulation and International Disinterest
Hong Kong’s strict regulatory approach has led some major exchanges to withdraw their applications. OKX and Bybit canceled their applications in May 2024, announcing their withdrawal from the market. One of the primary reasons for this retreat is the SFC’s demand to restrict services to mainland Chinese users. Notably, major platforms like Coinbase have shown little interest in the opportunities in Hong Kong. Despite being openly invited by Johnny Ng, a member of Hong Kong’s Legislative Council, Coinbase has not entered this market. However, some major players like Crypto.com continue the process without withdrawing their applications.
The regulations in Hong Kong have been criticized by some market observers for applying traditional financial rules too rigidly to the Web3 ecosystem. This approach has caused difficulties, particularly for smaller crypto companies in their application processes.
The JPEX Crisis: The Need for Stricter Crypto Regulation
Hong Kong’s decision to impose stricter regulations on the crypto sector has gained urgency following the recent JPEX scandal. The collapse of the fraudulent JPEX crypto exchange led to over 2,600 Hongkongers losing more than $200 million. This incident highlighted the need for more comprehensive oversight of crypto exchanges and led to criticisms of the SFC’s transparency in informing the public. In the wake of the JPEX scandal, the SFC began disclosing which exchanges have applied for licenses and took the lead in creating public lists of suspicious platforms.
Security and Future Vision in Crypto Exchanges
Hong Kong’s stringent oversight and licensing process for crypto exchanges aim to create a safe and transparent ecosystem in the global market. However, this process presents a challenging journey for many players trying to adapt to the dynamic nature of the crypto ecosystem. Especially with the adoption of Web3 and digital assets, regulatory scrutiny and market growth need to be balanced. In the future, international exchanges may require more flexible and crypto-specific regulatory mechanisms to engage with Hong Kong’s licensing processes.
As we approach the end of 2024, Hong Kong’s influence on the crypto sector and its regulations will continue to shape the crypto markets. Both local and global players’ interest in this market will determine how the regulatory environment and competition evolve. One thing is clear: as Hong Kong progresses toward becoming Asia’s crypto capital, it is working to build a more solid and reliable infrastructure for the crypto world.
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