Cryptocurrency exchange HKX has recently announced its decision to withdraw its license application from the Hong Kong Securities and Futures Commission (SFC), making it the latest exchange to do so due to regulatory challenges. The Hong Kong-based exchange cited difficulties in meeting the regulatory requirements set by the Hong Kong authorities as the reason for its withdrawal. As a result, HKX is shutting down its operations and advising existing users to withdraw their crypto assets. The exchange had already stopped new user registrations and suspended trading and deposit services in preparation for its closure.
The withdrawal of HKX’s license application adds to the increasing number of cryptocurrency exchanges facing obstacles in obtaining regulatory approval in Hong Kong. As of July 22, a total of 13 cryptocurrency exchanges or trading platforms have withdrawn their license applications. These include well-known exchanges such as HKVAEX, IBTCEX, QuanXLab, Huobi HK, Gate.HK, and Bybit (Spark Fintech Limited). Legislative Council member Wu Shuo has raised concerns over Hong Kong’s cryptocurrency licensing system, stating that the requirement imposed by the Hong Kong SFC regarding mainland Chinese users has negatively impacted market confidence.
Industry insiders suggest that entities withdrawing their applications may potentially update their legal frameworks or entities and reapply in the future. However, they may have to make significant changes and reapply under a different brand to comply with the regulatory requirements. Currently, 11 platforms, including HKbitEX, PantherTrade, and Accumulus, remain as licensed applicants in Hong Kong. Only OSL and HashKey have obtained formal licenses thus far. Despite the challenges faced by some exchanges, Hong Kong has recently launched its first batch of cryptocurrency-focused ETFs, signaling potential competition for similar products in the United States.
The increasing number of exchanges withdrawing their license applications in Hong Kong highlights the challenges faced by the cryptocurrency industry in obtaining regulatory approval. HKX’s decision to withdraw its application reflects the difficulties that many exchanges encounter when trying to meet the stringent regulatory requirements set by the Hong Kong authorities. The requirement to not have mainland Chinese users in any region poses a significant obstacle for traditional offshore exchanges, making it challenging for them to comply and obtain the necessary licenses.
While HKX has shut down its operations and does not currently have plans to resume activities or reapply for a license, the possibility of updating legal frameworks and reapplying in the future remains open. However, entities seeking to reapply may need to make substantial changes and potentially use a different brand to meet regulatory requirements. Despite the challenges faced by some exchanges, the cryptocurrency industry in Hong Kong continues to evolve, with the recent launch of cryptocurrency-focused ETFs marking significant developments in the market. As the regulatory landscape continues to evolve, exchanges will need to adapt to meet the requirements set by the authorities to operate legally in Hong Kong.
