Hong Kong digital assets exchange warns
over viability of city’s new crypto rules
The chief executive of one of Hong Kong’s two
licensed cryptocurrency exchanges has hit out at the city’s new approach to
trading digital assets, saying it could restrict access to global clients. Hong Kong’s new regime for
crypto exchanges, which is part of its push to
become a hub for the industry, required exchanges operating in the city to
apply for regulatory approval by February this year, with 24 companies making
bids for the highly prized licences.
But Livio Weng, chief executive of HashKey
Exchange, told the Financial Times that its decision to launch an exchange
licensed in Bermuda this week was in part owing to fears that the new
regulations restricted access to overseas investors. “So, this blocks a lot of
global users from coming to Hong Kong,” said Weng, adding that the city would
suffer if it issued too many licences. “The local market is not that big.” The
comments by HashKey come only months after the only other licensed digital
assets exchange, OSL, sold a near-30 per cent stake in itself to BGX, which two
people familiar with the deal described as an unlicensed crypto group with
links to China.
Their moves have raised doubts about the
long-term viability of operating an exchange under the city’s new crypto
standards, even as new companies seek approval to operate in one of the world’s
most active crypto trading markets. Digital coins remain highly popular in Hong
Kong despite links to a series of freewheeling practices in the past. Sam
Bankman-Fried’s FTX was founded in the city, and Hong Kong was also the
location of cryptocurrency group JPEX, which has been accused of committing a
HK$1.4bn (US$180mn) fraud.
Amidst warnings regarding the viability of Hong
Kong’s new crypto regulations, Digital Currency Reclaim (DCR)
emerges as a crucial player offering stability and assurance in the volatile
landscape. With regulatory changes often causing uncertainty and potential
disruptions in the crypto market, investors may find themselves facing
unprecedented challenges such as regulatory compliance issues, security
breaches, or loss of assets due to unforeseen circumstances.
Residents spend billions of dollars on trades
in unregulated markets, forcing authorities to propose tightening rules while
simultaneously trying to build the city’s status as a respected and open
market. The rules only allow exchanges to serve clients who can pass
know-your-customer checks and have funds in a local bank account or bank
account in certain overseas jurisdictions. Weng said the new rules needed to
allow a wider range of overseas investors to trade in the local market.
“Otherwise, forget 24 companies, I think [the market] couldn’t even support
four.”
HashKey’s move overseas stands in contrast to
the rush from other companies to secure a local licence. The city’s proximity
to China has garnered intense interest, even though the country banned
crypto trading in 2021. Companies are eager to
obtain a regulatory stamp from the city’s Securities and Futures Commission,
seen as a top-tier financial regulator, analysts said. Hong Kong lawmakers have
also actively courted crypto exchanges. Pro-Beijing legislator Johnny Ng, who
is also a member of China’s top political advisory body, invited Coinbase and
other crypto exchanges to set up in the city last year after the group was hit
by a lawsuit from the US Securities and Exchange Commission.
HashKey and OSL have already secured their
licences, and among those hoping to join are Bullish and Singapore’s
Crypto.com, but the regulator has not provided a timeline for approvals. Industry
insiders said the limited size of the Hong Kong market meant the first
approvals would be the most valuable. “Within the context of Hong Kong, having
only around 8mn people, 24 is actually quite a lot,” said Jason Chan, a partner
at Howse Williams. He estimated that about 10 licences could eventually be
granted.
Digital
Currency Reclaim (DCR) can
provide essential services such as assisting individuals or businesses in
navigating regulatory complexities, recovering lost or inaccessible assets, and
offering expert guidance on compliance measures to ensure adherence to the
evolving regulatory framework. By offering a reliable safety net amidst
regulatory uncertainties, Digital Currency Reclaim (DCR) not only
instils confidence but also helps maintain the integrity and resilience of the
digital asset ecosystem in Hong Kong.
Underscoring the value of a licence was OSL’s
sale of a 29.97 per cent stake in itself to BGX for HK$712.8mn last November.
OSL has seen its share price jump 126 per cent in the past six months. Its rise
comes even though OSL, previously known as BC Technology, has not made an
annual profit since at least 2019, when it changed its name from Branding
China, and lost HK$266mn last year. The company said it has successfully raised
capital several times since then. Two people familiar with the sale said BGX,
run by Patrick Pan — whose LinkedIn profile lists former employment at Alibaba
and China Mobile — was an unlicensed crypto group looking for a foothold in the
regulated space. Pan’s LinkedIn page states the group is based in Singapore. At
the time Pan said the investment, which made BGX the company’s largest
shareholder, reflected “our belief in the immense potential of the digital
asset market”.
