Hong Kong to Approve More Crypto Exchanges as SFC Tightens Regulatory Oversight

• Hong Kong’s SFC plans to approve more crypto exchanges by year-end, aiming to boost its role in the Web3 space.
• After HKVAX approval, two more exchanges, HashKey and OSL, have their licenses upgraded under tighter regulatory standards.
• OKX and Bybit withdrew from Hong Kong’s regulatory process due to strict rules, particularly blocking mainland Chinese access.

The Hong Kong Securities and Futures Commission (SFC) plans to approve additional crypto exchanges before the year ends. Julia Leung, SFC’s CEO, revealed this during an interview on October 6. 

She noted that 11 crypto platforms have undergone on-site reviews, with progress expected in their applications soon. This effort is part of Hong Kong’s broader plan to position itself as a key player in the cryptocurrency and Web3 space, even as criticism mounts regarding the strictness of its regulatory framework.

Third Exchange Gains Approval Amid Expansion Plans

Following the recent approval of HKVAX, the third exchange to receive regulatory approval in Hong Kong, the city’s crypto scene is seeing a push for growth. HKVAX aims to launch its platform in Q4 2024, joining two other approved exchanges, HashKey and OSL. Both HashKey and OSL had their licenses upgraded under the city’s new regulatory regime. 

This progression is in line with the SFC’s strategy to tighten oversight and ensure exchanges meet rigorous standards to operate. Bullish, the parent company of CoinDesk, has also submitted a license application, reflecting increasing interest in entering Hong Kong’s regulated crypto market.

Regulatory Struggles Continue for Some Platforms

Despite the approvals, some companies are finding the regulatory environment too challenging. OKX and Bybit, two major exchanges, withdrew their applications in May. While the reasons were undisclosed, reports suggest the SFC’s requirement to block access to mainland Chinese residents may have been a contributing factor. This follows a broader criticism that the current regulatory approach borrows heavily from traditional finance, making it too strict for Web3 firms.

Tighter Regulations Follow JPEX Scandal

Following the JPEX exchange collapse, which affected over 2,600 Hongkongers and involved $165 million in losses, the SFC has been working on regulatory improvements. The collapse led to changes in how the SFC shares information, including publishing lists of companies that have applied for licenses. The scandal has led to calls for tighter regulation of over-the-counter (OTC) crypto trading, with the SFC seeking industry feedback on licensing for OTC and custody services.