Local cryptocurrency firms HashKey Group and OSL have received approval from regulators to operate Hong Kong’s first licensed cryptocurrency exchanges for retail investors, as the government continues to burnish its credentials as a global crypto hub.
HashKey and OSL were already the only two local exchanges licensed by the Securities Futures Commission (SFC) to provide certain digital asset trading services to professional investors. On Thursday, they both announced that their existing licences had been upgraded to allow them to offer their services to retail investors.
“This is a monumental moment not only for OSL but for the broader crypto market,” said Gary Tiu, head of regulatory affairs at OSL, in a Thursday statement. He said that the move showed that digital asset markets can be “regulated and safe”.
OSL added that “effective immediately”, it would offer retail investors the “ability to register on its platform and buy/sell digital asset products, starting with the popular cryptocurrencies bitcoin and ethereum”. A spokeswoman added that the company is currently working on a new app for retail investors.
During a press briefing on Thursday, Livio Weng, HashKey Group COO, said his company was also working on its own HashKey Exchange mobile app that will be available to retail investors and released in a few weeks, offering trading in bitcoin and ether, to begin with. The company said it was rebranding itself from HashKey Group to HashKey Exchange.
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The company is hoping to sign up one million retail users by the end of this year, he added. Users can already register on the HashKey Exchange website.
Contrary to some early media reports, the upgraded licences are not directly part of Hong Kong’s latest virtual asset service provider (VASP) licensing regime launched on June 1, which allows exchanges approved by the SFC to serve retail investors.
Currently, no exchanges have received a license under the new regime, though they are permitted a grace period of one year to comply with the new SFC guidelines or exit the market.
OKX and Huobi, founded in mainland China, are among other major players publicly stating they are applying for a licence. The exchanges have also already started to sign up retail users in the city, while they work on complying with the new rules in order to receive their licences.
In a message to the Post, OKX’s global chief commercial officer Lennix Lai said the company was making “good progress” on submitting its licensing application and remained committed to the Hong Kong market, having set up a Hong Kong entity and acquired 10,000 new local users this year.
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“Regulatory updates such as the one shared today are encouraging, as having more regulated players in the market contributes to a more robust and competitive digital asset ecosystem in the city,” added Lai.
In May, Alex Wong, managing director and Asia Head of FTI Capital Advisors mergers and acquisitions advisory, which advises crypto clients in Hong Kong, told the Post that certain exchanges had already been fast-tracked by the SFC and had received “in principle” approval under the new regime, though he expected official announcements to take several months.
While aimed at attracting more crypto business, Hong Kong’s new licensing regime is also targeted at mitigating risk following a tumultuous 2022 that saw a number of high-profile exchanges collapse, such as Sam Bankman-Fried’s FTX exchange.
The licensing regime requires exchanges to comply with a broad range of requirements and standards, including user onboarding, asset custody, cybersecurity and corporate governance.
Exchanges are also required under SFC regulations to conduct due diligence on the cryptocurrency tokens they trade, allowing only those with large market capitalisations and high liquidity, such as bitcoin and ether, according to the SFC.
In its Thursday announcement, HashKey also said it had been expanding its team, recently onboarding over 10 senior professionals with extensive experience in exchange operations.
HashKey also disclosed a partnership with Standard Chartered Bank to provide users with convenient fiat currency deposit and withdrawal services. It added it would look to establish more partnerships with top-tier banks in the city.
Some crypto companies have previously struggled to partner with banks in the city for settlement services due to their lack of official licensing.ncG1vNJzZmivp6x7tK%2FMqWWcp51kwaavx2iYq6yZmLmme5JraXJxYWh8qa3SoaKesV2Wu6V5zqyjZqqVmLKqwsRmn6iml2K4sLrGrGSfoaKowW6tz6mpqK6RocBuu8%2BeqZqslWKws8XPraZmnaiYtaK6xp6qZqqVqa6quIyipa%2Bdo6m8s78%3D