Cryptocurrency

2024

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<ul>
 <li>Major exchanges like Binance and OKX struggle with Hong Kong’s stringent crypto licensing rules, impacting market confidence.</li>
 <li>The SFC’s strict requirements for crypto licenses in Hong Kong have led to significant market exits by major exchanges.</li>
 <li>Hong Kong’s new crypto licensing system, criticized for its inflexibility, has caused prominent exchanges to withdraw applications.</li>
</ul>
<p>Wu Blockchain, a prominent cryptocurrency news source, has reported significant criticism of Hong Kong’s cryptocurrency licensing system. Market confidence has been severely impacted, as highlighted by Hong Kong legislator. Large exchanges like Binance and OKX have been unable to obtain licenses, while those that have managed to do so find it challenging to turn a profit.</p>
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   <p lang="en" dir="ltr">A Hong Kong legislator published an article criticizing Hong Kong's cryptocurrency licensing system for shaking market confidence. Not only are large exchanges such as Binance OKX unable to obtain licenses, but companies that obtain licenses also find it difficult to make a…</p>— Wu Blockchain (@WuBlockchain) <a href="https://twitter.com/WuBlockchain/status/1797190557443436765?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">June 2, 2024</a>
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<p>The Hong Kong Securities and Futures Commission (SFC) <a href="https://mp.weixin.qq.com/s/0J_pIiz3ym4p68SqBTunOQ" target="_blank" rel="noopener noreferrer nofollow">issued</a> a circular on May 31, 2023, detailing transitional arrangements for the VATP licensing system, effective June 1, 2023. A one-year transition period was set, ending on June 1, 2024. By this date, all virtual asset trading platforms in Hong Kong must secure a license or cease operations.</p>
<p>By the end of May 2024, numerous exchanges had withdrawn their license applications. Notably, HKVAEX, believed to be affiliated with <a href="https://cryptonewsland.com/binance-set-to-usher-altseason-following-rapid-listing-of-low-and-mid-cap-altcoins-which-will-explore-first/" target="_blank" rel="noopener noreferrer nofollow">Binance</a>, withdrew on March 28, 2024. Other withdrawals followed: IBTCEX, QuanXLab, and Huobi HK on May 14; Gate HK on May 22; OKX HK on May 24; and Bybit (Spark Fintech Limited) on May 31. As of May 31, eleven companies had either withdrawn or returned their applications, leaving seventeen still applying.</p>
<p>A key issue is the SFC’s requirement for applicants to ensure they have no mainland Chinese users in any region. This condition has proven impossible for traditional offshore exchanges to meet. OKX attempted to form an industry alliance to oppose this requirement but ultimately failed.</p>
<p>The new licensing system, intended to regulate virtual asset trading platforms (VATP), took effect on June 1, 2023. The transition period allowed operators to apply for licenses before February 29, 2024, and comply with new regulations from June 1, 2024. However, as the deadline approached, many operators chose to exit the Hong Kong market.</p>
<p>The stringent conditions have discouraged prominent exchanges like Coinbase from applying. Since February, notable withdrawals included Gate and Huobi, with the situation worsening in May. <a href="https://cryptonewsland.com/crypto-exchange-giant-okx-halts-hong-kong-operations-amid-regulatory-storm-bearish-dip-ahead/" target="_blank" rel="noopener noreferrer nofollow">OKX</a>, among the top three in global trading volume, also withdrew. The remaining applicants are mostly smaller in scale, some lacking industry experience or having minimal involvement in the Web3 field.</p>
<p>OKX’s exit has sparked industry debate, questioning Hong Kong’s commitment to Web3 development. Critics argue that the authorities’ cautious approach and traditional financial mindset weaken the competitiveness and flexibility of the licenses. Some operators, despite significant investment, decided to withdraw their applications at the last stage.</p>
<p>Industry insiders worry that the new licensing system might mimic previous regulatory missteps, like the “food truck incident” or the promotion of virtual banks, resulting in much ado about nothing. They fear that even with licenses, it will be challenging for operators to develop profitable models.</p>
<p>The SFC’s licensing conditions demand high standards in asset custody, conflict of interest avoidance, network security, accounting, risk management, and anti-money laundering. These conditions, borrowed from traditional finance, are considered too strict for Web3 finance. Critics say the authorities lack foresight and flexibility to promote Web3 financial innovation.</p>
<p>Additionally, the government and regulatory agencies are seen as lacking innovation. They require licensed operators’ management to have years of virtual asset business experience, while regulators lack Web3 business expertise. This gap creates communication difficulties due to different technical backgrounds and market experiences.</p>
<p>The withdrawal of licenses has shaken market confidence in Hong Kong’s Web3 development. To restore confidence, the SFC needs to make timely licensing decisions, offering investors long-term stability. Trading platforms must provide breakthrough products balancing legal compliance, investor protection, and financial innovation. The authorities must adopt new thinking and determination to encourage Web3 finance.</p>
<h4 class="wp-block-heading" id="h-read-more">Read More:</h4>
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 <li><a href="https://cryptonewsland.com/hong-kong-to-apply-rigorous-check-on-crypto-licensing/" rel="noopener noreferrer nofollow">Hong Kong to Apply Rigorous Check on Crypto Licensing</a></li>
 <li><a href="https://cryptonewsland.com/singaporean-central-bank-tightens-crypto-licensing/" rel="noopener noreferrer nofollow">Singaporean Central Bank Tightens Crypto Licensing</a></li>
 <li><a href="https://cryptonewsland.com/governor-has-vetoed-the-california-bitlicense-bill/" rel="noopener noreferrer nofollow">Governor has vetoed the California ‘BitLicense’ Bill</a></li>
 <li><a href="https://cryptonewsland.com/hong-kongs-signum-digital-receives-controversial-sto-approval-from-sfc/" rel="noopener noreferrer nofollow">Hong Kong’s Signum Digital Receives Controversial STO Approval From SFC</a></li>
 <li><a href="https://cryptonewsland.com/hong-kong-sfc-concludes-consultation-virtual-asset-trading-platforms/" rel="noopener noreferrer nofollow">Hong Kong SFC Regulations for Virtual Asset Platforms</a></li>
</ul>
<p>The post <a href="https://cryptonewsland.com/hong-kongs-cryptocurrency-licensing-system-faces-criticism-and-market-exit/" rel="noopener noreferrer nofollow">Hong Kong’s Cryptocurrency Licensing System Faces Criticism and Market Exit</a> appeared first on <a href="https://cryptonewsland.com" rel="noopener noreferrer nofollow">Crypto News Land</a>.</p>

Hong Kong’s Cryptocurrency Licensing System Faces Criticism and Market Exit

Crypto News Land

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