The Securities and Futures Commission (SFC) of Hong Kong has recently updated its list of virtual asset trading platforms. Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, eleven platforms have been "deemed-to-be-licensed": HKbitEX, PantherTrade, Accumulus, DFXLabs, Bixin.com, xWhale, YAX, Bullish, Crypto.com, WhaleFin, and MatrixportHK. Meanwhile, the list of applicants now includes only six platforms that have not been granted this status: BGE, HKVAX, VDX, bitV, HKX, and bitcoinworld.

The SFC reminds the public that all listed applicants are not yet formally licensed and may not comply with its requirements. The "transition period" for virtual asset trading platforms operating in Hong Kong under the Ordinance ended on June 1.

Understanding the SFC's Lists

The SFC maintains several lists to provide transparency regarding the licensing status of virtual asset trading platforms (VATPs). These lists help the public make informed decisions.

List of VATP Applicants

This list includes the names of operators whose license applications have not yet been approved by the SFC. It also includes those applicants who were "deemed-to-be-licensed" as of June 1, 2024. It is crucial to understand that all entities on this list are not formally licensed by the SFC and may not be adhering to its regulatory standards.

The primary purpose of this list is to help the public identify if a VATP is making false or misleading claims about its license application status with the SFC.

Investors should always refer to the SFC's official "List of Licensed Virtual Asset Trading Platforms" for the names of fully licensed operators. The SFC further cautions investors about the risks of trading on platforms that are only "deemed-to-be-licensed"—as they may not ultimately receive a license and could be forced to cease operations in Hong Kong—or on any unregulated platforms, including those based overseas.

Any applicant not "deemed-to-be-licensed" should not be actively conducting business or promoting its services to investors in Hong Kong.

*An application may be returned by the SFC if it is incomplete or has unresolved material issues.
^Deemed-to-be-licensed applicant.

Date not publicly disclosed.

List of Returned, Refused, or Withdrawn Applications

This separate list includes the names of applicants that have been removed from the main applicant list because their application has been returned, refused, or withdrawn.

An applicant may be added to this list for reasons including, but not limited to:

1. The application was returned by the SFC for being incomplete or having unresolved material issues.
2. The application was refused by the SFC or withdrawn by the applicant.

Industry Concerns and Legislative Perspectives

The recent wave of application withdrawals and returns has sparked significant discussion within the industry. Hong Kong Legislative Council member Duncan Chiu has commented on the situation, noting that the new licensing regime has revealed several areas of concern that may be impacting its effectiveness.

Mr. Chiu pointed out that the SFC's licensing conditions initially failed to attract major global exchanges like Coinbase. Since February, several other internationally recognized platforms, such as Gate.io and Huobi, have withdrawn their applications. The situation intensified in May, with six operators, including the globally top-ranked OKX, announcing their exit. The remaining applicants are largely smaller entities, some with limited industry experience or traditional financial institutions attempting to enter the Web3 space without a deep commitment to it.

Key Identified Challenges

The analysis highlights three primary challenges with the current regulatory approach:

1. Fragmented Policy Development: Policies concerning different aspects of the virtual asset market (e.g., VATPs, stablecoin issuance, OTC trading) are being designed by different government departments. This appears to lack a comprehensive, strategic overview for overall industry development. The staggered consultation and legislative timelines for these policies have resulted in a slow, piecemeal rollout for Hong Kong's Web3 ecosystem, which struggles to keep pace with rapid technological evolution.
2. Overly Stringent Traditional Requirements: The SFC's requirements for asset custody, conflict avoidance, cybersecurity, and anti-money laundering are robust. However, many are borrowed directly from traditional finance. When applied to the novel context of Web3 finance, they can be perceived as excessively strict and inflexible. Some applicants have expressed that regulators lack a forward-looking vision for next-generation fintech, applying traditional financial thinking to Web3 "financial innovation."
3. A Gap in Innovation DNA: A common sentiment among industry professionals is a disconnect between regulators and the innovative nature of Web3. While licensed operators are required to have management with years of virtual asset experience, there is a perception that the government and regulatory bodies themselves lack senior officials with hands-on experience operating Web3 businesses. This gap in technical background, market experience, and innovative spirit can hinder effective communication and understanding.

This recent "exit wave" has shaken market confidence in Hong Kong's ambition to become a global Web3 hub. To restore confidence, it is suggested that the SFC should make licensing decisions promptly to provide clarity and long-term assurance for investors. Furthermore, the range of products offered by licensed platforms must be allowed to innovate, balancing the need for a sound legal framework and investor protection with the imperative for financial innovation. Future approval processes for new products will need to demonstrate a renewed commitment to encouraging Web3 development.

For those navigating this evolving landscape, understanding regulatory compliance is key. 👉 Explore more strategies for regulatory navigation.

Frequently Asked Questions

What does "deemed-to-be-licensed" mean in Hong Kong?
"Deemed-to-be-licensed" is a temporary status for virtual asset trading platform applicants who applied before the February 29th, 2024 deadline and whose applications were not rejected or returned by the SFC by June 1st. It allows them to continue operating while their formal license is under review, but they are not yet fully licensed and must still work towards meeting all requirements.

Why are so many companies withdrawing their license applications?
Companies withdraw for various reasons, including the perceived high cost and complexity of compliance, stringent requirements that are difficult to meet, a strategic decision to focus on other markets, or because their application was returned by the SFC as incomplete, prompting them to reconsider their approach.

Is it safe to use a "deemed-to-be-licensed" platform?
While these platforms are under the regulatory gaze of the SFC, they have not yet been fully approved. There is a risk that they may not ultimately receive a license and could be required to shut down their Hong Kong operations. Investors should exercise caution and prefer SFC-fully licensed platforms where possible.

What is the difference between the SFC's different lists?
The SFC maintains a "Licensed VATP List" (fully approved platforms), a "VATP Applicant List" (platforms undergoing review, including deemed-to-be-licensed ones), and a list for "Returned, Refused, or Withdrawn Applications." Each serves to provide clarity on the current regulatory standing of different operators.

How does Hong Kong's approach compare to other jurisdictions?
Hong Kong has taken a more formal and comprehensive licensing approach compared to some other regions, aiming for strong investor protection. However, this has also led to criticism that its rules are overly strict and modeled on traditional finance, potentially stifling innovation compared to more agile regulatory environments.

What products can licensed platforms offer?
As of now, licensed platforms in Hong Kong are primarily permitted to offer trading in larger-cap cryptocurrencies like Bitcoin and Ethereum to retail investors. Approval for trading other products, such as stablecoins or derivatives, requires separate authorization from the SFC, which is part of the ongoing regulatory development.