Crypto Exchanges Flout Hong Kong Rules Requiring a License to Serve Locals

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Crypto exchanges operating in Hong Kong must be licensed by the SFC, or “deemed-to-be-licensed” by being qualified applicants. Photo: IC Photo

Trading cryptocurrencies on exchanges that have not applied for a local license remains possible in Hong Kong, Caixin has found, nearly a month past the city’s deadline for exchanges to obtain or apply for a license.

Cryptocurrencies deposited in an account registered with a Hong Kong ID on Binance before the June 1 deadline were still accessible and tradable on Wednesday, although logging onto the account triggered a pop-up saying “The products and services on this app are not intended for individuals in Hong Kong.”

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Despite a deadline for cryptocurrency exchanges to obtain licenses in Hong Kong by June 1, some exchanges continue operating without them.
Binance and Coinbase still allow trading for users with Hong Kong IDs, but further fund deposits via Hong Kong bank cards fail.
Only two exchanges, OSL Exchange and HashKey Exchange, are licensed, while many applications are pending, and some major exchanges withdrew due to high compliance costs.

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Who’s Who

Binance: Binance, one of the world's largest crypto exchanges, hasn't applied for a license with the Hong Kong Securities and Futures Commission (SFC). While users can still access accounts registered before the June 1 deadline, attempts to deposit more funds using Hong Kong bank cards fail. The SFC has requested unlicensed exchanges to liquidate Hong Kong users' assets by the end of August.

Coinbase: As of Wednesday, it is still possible to register a new account on Coinbase using a Hong Kong IP address and a Hong Kong ID, even though the platform hasn't applied for a license. The SFC said it will “take appropriate measures for any violations of rules” but doesn’t comment on specific incidents.

OSL Exchange: OSL Exchange is one of the only two crypto trading platforms licensed by Hong Kong’s Securities and Futures Commission (SFC). The licensing is part of Hong Kong’s broader effort to establish itself as a global digital asset hub and regulate cryptocurrency trading.

HashKey Exchange: HashKey Exchange is one of only two crypto trading platforms licensed by the Hong Kong Securities and Futures Commission (SFC) as of Thursday. The licensing comes under Hong Kong's regulatory framework for cryptocurrency trading, effective June 1, 2023, aimed at establishing itself as a global digital asset hub.

OKX: OKX is a major crypto exchange that withdrew its license application before the end of the transition period in Hong Kong. This decision was influenced by high compliance costs, amounting to tens of millions of Hong Kong dollars, and stringent regulations, leading to a perceived mismatch between costs and benefits.

Bybit: Bybit withdrew its license application to operate in Hong Kong before the end of the transition period. This move might be due to high compliance costs and strict regulations, which some believe create a mismatch between costs and benefits.

Huobi HK: Huobi HK is mentioned as one of the major crypto exchanges that withdrew its license application before the end of the transition period in Hong Kong. This decision is reportedly due to high compliance costs and strict regulations, which led to a perceived mismatch between costs and benefits.

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What Happened When

June 1, 2023：: Rules requiring virtual asset trading platforms to be licensed by the SFC or 'deemed-to-be-licensed' by being qualified applicants came into effect.

June 1, 2024：: Deadline for crypto exchanges to obtain or apply for a local license in Hong Kong.

June 12, 2024：: SFC asked unlicensed exchanges to liquidate all Hong Kong users’ assets by the end of August, 2024.

June 26, 2024：: Cryptocurrencies were still accessible and tradable in accounts registered with a Hong Kong ID on Binance, although depositing more funds failed.

June 26, 2024：: SFC responded to Caixin's inquiry, stating it will take measures for any violations but did not comment on specific incidents.

June 26, 2024：: It was still possible to register a new account on Coinbase using a Hong Kong IP and ID.

June 27, 2024：: As of this date, only OSL Exchange and HashKey Exchange had been licensed by the SFC, while at least 17 exchanges had applied for a license.

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