- SFC inspections reveal gaps in compliance, threatening Hong Kong’s crypto hub ambitions.
- Major exchanges face delays, with licenses at risk due to unmet regulatory standards.
- JPEX incident raises SFC’s focus on protecting client assets and strict KYC enforcement.
Hong Kong’s crypto hub ambitions hit a snag as exchanges grapple with strict licensing requirements from the Securities and Futures Commission (SFC).
On-site inspections by the SFC have revealed shortcomings in some crypto platforms’ operations, raising concerns about the city’s ability to establish itself as a leading digital asset center.
Since June, when several crypto platforms received deemed-to-be-licensed status, the SFC has been conducting inspections to ensure compliance with its regulations.
Sources indicate that some platforms have fallen short of the SFC’s standards in key areas like safeguarding client assets and preventing cybercrime.
The reliance on a small group of executives to manage these essential functions has been flagged as a significant concern. The SFC’s inspections are ongoing, and findings may evolve, potentially leading to further complications for the involved platforms.
In addition, the SFC has yet to disclose which exchanges have failed to meet its requirements, but the impact of these inspections is already being felt. The 11 exchanges under review include well-known names such as Crypto.com, Bullish, and HKbitEX. These platforms have been prohibited from onboarding new clients until they secure full licenses.
Moreover, the SFC has warned that platforms that fail to fix the identified issues could lose their deemed-to-be-licensed status or have their license applications denied. This would force them to start the application process over, causing further delays to their operations.
The recent scandal involving JPEX, an unlicensed crypto platform that allegedly defrauded investors of HK$1.6 billion ($205 million), has increased the urgency of these inspections.
The SFC stated that full licenses, expected by the end of 2024, will only be issued to applicants who fully comply with all regulations, especially those focused on protecting client assets and ensuring strict know-your-client procedures.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
