SINGAPORE – Twenty-two companies have applied for licences to operate digital asset exchanges in Hong Kong, including larger players like Bybit, OKX and Crypto.com, as the city tries to develop a regulated hub for the industry.
Gate.io, HTX and Bullish were among others with notable trading volumes to feature on the list.
Hong Kong imposed a Feb 29 deadline for applications, and platforms that have not submitted their applications must cease services by the end of May.
Binance, the world’s largest exchange, was absent from the list. So were Coinbase, the top United States platform, and Kraken, another popular trading venue.
The crypto industry will sift through the applicants to gauge the allure of Hong Kong as a centre for digital assets. The city’s nine-month-old virtual asset rulebook prioritises investor protection, leading to questions about whether compliance costs could be an obstacle for some businesses.
“Like in traditional financial services, there is definitely a cost in operating a regulated business,” said Ms Ding Chen, head of regulatory affairs at Bullish. “So we have factored that into overall strategy.”
Hong Kong pivoted towards creating a crypto hub in late 2022, part of an effort to appear cutting-edge amid doubts about its future. There are currently two authorised digital asset exchanges, HashKey Exchange and OSL Group.
The evolving regulatory landscape will likely impact the way OSL constructs its business, and costs are something that will have to be assessed, the company’s head of regulatory affairs, Mr Gary Tiu, said.
Most of the estimated US$64 billion (S$86 billion) in crypto that flowed into Hong Kong in the year to June did so in over-the-counter, or OTC, trades rather than via digital asset exchanges, according to data from Chainalysis.
Small shops dotted across the city that swap between cash and digital assets with few questions asked include one such OTC route. Regulators are cracking down on these outlets under a plan outlined in February.
Hong Kong is also working on rules for stablecoins and is open to allowing exchange-traded funds that invest directly in select cryptocurrencies. The government in February sold US$750 million of digital green bonds using HSBC Holdings’ tokenisation platform. BLOOMBERG
