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<h4 class="wp-block-heading">The Hong Kong Securities and Futures Commission (SFC) is set to inspect the offices of cryptocurrency trading platforms seeking to operate as licensed virtual asset trading platforms (VATPs) in the region.</h4> 
<h2 class="wp-block-heading" id="end-of-non-contravention-period">End of Non-Contravention Period</h2> 
<p>In a <a href="https://apps.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=24PR95" target="_blank" rel="noopener">May 28 announcement</a>, the SFC reminded that the “non-contravention period” for VATPs operating in Hong Kong is concluding on June 1. This period allowed platforms to operate while their license applications were under review.</p> 
<h2 class="wp-block-heading" id="onsite-inspections-for-compliance">Onsite Inspections for Compliance</h2> 
<p>The SFC has <a href="https://www.sfc.hk/en/Welcome-to-the-Fintech-Contact-Point/Virtual-assets/Virtual-asset-trading-platforms-operators/Lists-of-virtual-asset-trading-platforms" target="_blank" rel="noopener">stated </a>that platforms “deemed-to-be-licensed” must undergo an onsite inspection to ensure they <a href="https://btc-pulse.com/turkey-drafts-crypto-international-standards/">comply </a>with regulatory requirements. The inspections will particularly focus on the safeguarding of client assets and know-your-client (KYC) processes.</p> 
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> 
 <p>“The SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on their safeguarding of client assets and know-your-client processes,” the announcement said.</p> 
</blockquote> 
<h2 class="wp-block-heading" id="consequences-for-non-compliance">Consequences for Non-Compliance</h2> 
<p>Any applicants found violating compliance measures will have their licenses <a href="https://btc-pulse.com/new-york-ag-letitia-james-reaffirms-strict-crypto/">denied </a>and may face further regulatory actions. Currently, 18 entities are labeled as “deemed-to-be-licensed,” a temporary status until the licensing process is finalized. After June 1, unlicensed platforms offering services will be breaching anti-money laundering and counter-terrorism laws.</p> 
<h2 class="wp-block-heading" id="marketing-and-retail-user-restrictions">Marketing and Retail User Restrictions</h2> 
<p>The SFC has emphasized that deemed-to-be-licensed VATP applicants are not formally licensed and thus cannot market their services or onboard retail users.</p> 
<h2 class="wp-block-heading" id="orderly-wind-down-plans">Orderly Wind-Down Plans</h2> 
<p>If an application is rejected, the platform must submit a plan for the orderly winding down of its business in <a href="https://btc-pulse.com/okx-withdraws-vasp-license-application-hong-kong/">Hong Kong</a>, focusing on protecting client interests.</p> 
<h2 class="wp-block-heading" id="licensed-platforms-and-withdrawn-applications">Licensed Platforms and Withdrawn Applications</h2> 
<p>As of now, only OSL Digital Securities Limited and Hash Blockchain Limited are fully licensed VATPs. Some applicants, including the Hong Kong arm of crypto exchange <a href="https://www.gate.hk/article/31507" target="_blank" rel="noopener">Gate.io</a> and OKX, have <a href="https://btc-pulse.com/okx-withdraws-vasp-license-application-hong-kong/">withdrawn </a>their applications after failing to meet the SFC’s requirements.</p> 
<h2 class="wp-block-heading" id="rise-in-crypto-related-scams">Rise in Crypto-Related Scams</h2> 
<p>The licensing requirements come amid an increase in cryptocurrency-related scams in Hong Kong. In March, the SFC warned about platforms impersonating the two licensed entities, OSL Digital and Hash Blockchain Limited.</p> 
<p>With these stringent measures, the SFC aims to ensure a robust regulatory framework for cryptocurrency trading in Hong Kong, prioritizing client protection and compliance with anti-money laundering laws.</p>

Hong Kong SFC to Carry Out Onsite Inspections for Crypto License Applicants

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