Hong Kong Regulator Finds ‘Unsatisfactory Practices’ at Some Crypto Entities Seeking Full License: Report

As a seasoned researcher with a keen interest in the dynamic world of finance and technology, I have witnessed the rapid evolution of cryptocurrencies and their exchanges. In my years of studying this space, I’ve learned that while it is a promising frontier, it also presents unique challenges due to its novelty and complexity.

In a report by Bloomberg, it was disclosed that some cryptocurrency platforms undergoing a full license application process with Hong Kong’s Securities and Futures Commission (SFC) have been found to have less than optimal practices following on-site inspections.

According to the report, some cryptocurrency companies rely too heavily on just a few key figures for safeguarding customer funds, whereas others lack sufficient protection against cyber threats.

A representative from the SFC shared with Bloomberg that they have carried out certain inspections, some of which are still being finalized and may be revised. However, they prefer not to discuss details regarding individual cases.

If a platform fails to address significant issues found during on-site inspections, the Securities and Futures Commission (SFC) might choose to revoke their presumed licensed status or reject their licensing requests, as stated by the representative.

The SFC declined to add any more details to the statement given to Bloomberg.

According to Bloomberg’s report, it remains unclear which specific entities, among the 11 that have sought a full license from the SFC (which includes Crypto.com, HKbitEX, PantherTrade, and Bullish), were found to have significant issues or shortcomings.

As a crypto investor, I noticed that those individuals didn’t promptly reply when CoinDesk, which happens to be owned by Bullish, reached out for a comment.

Towards the end of May, the Securities and Futures Commission (SFC) announced that it would carry out physical inspections for those cryptocurrency trading platforms that expressed a desire to move forward with their licensing requests. Out of as many as 12 entities, OKX and ByBit chose to discontinue their applications. Currently, OSL and HashKey are the only two crypto exchanges in Hong Kong that have completed the licensing process.

A recent update might cause complications for Hong Kong’s ambition to establish itself as a leading international center for cryptocurrency, an aspiration that led to the approval of spot-crypto products earlier this year.