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Hong Kong to Inspect Crypto Platform Offices as Key Compliance Deadline Approaches

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If some or all of the 18 license applicants fail to submit their applications by this crucial deadline, Hong Kong’s efforts to establish itself as a significant hub for cryptocurrency may come under scrutiny.

CryptoCaster Quick Check:

  • The regulatory body in Hong Kong will carry out on-site examinations of cryptocurrency platforms that provide trading services and have submitted license applications.
  • All cryptocurrency platforms operating in Hong Kong will need to be licensed or “deemed-to-be-licensed” by June 1, 2024.

As a crucial deadline approaches, the Securities and Futures Commission (SFC) of Hong Kong will visit cryptocurrency trading platforms that wish to proceed with their licensing applications in person, the regulator revealed on Tuesday.

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By June 1, 2024, all cryptocurrency platforms operating in Hong Kong that offer trading services under the name virtual asset trading platforms (VATPs) will need to have a SFC license or be temporarily in the status of “deemed-to-be-licensed,” meaning they will need to take steps to become fully compliant. According to the SFC, operating in Hong Kong after that date would constitute a “criminal offence” in violation of anti-money laundering and counterterrorism legislation.

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The announcement stated, “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, during the coming months while the deemed-to-be-licensed VATP applicants pursue their applications.”

The only two companies that are currently listed as having SFC licenses are OSL Digital Securities Limited and Hash Blockchain Limited. Eleven entities have either removed or withdrawn their applications, leaving only eighteen entities’ applications in the system. Huobi Hong Kong and OKX, two cryptocurrency exchanges, recently withdrew their applications.

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Notably, the number of the 18 entities that are still listed in the SFC system as “deemed-to-be-licensed” will be known by June 1. Should any or all of the 18 applicants fail to advance past this crucial deadline, Hong Kong’s efforts to establish itself as a leading center for cryptocurrency may come under scrutiny.

According to the SFC, applicants should not actively promote their offerings or bring on new retail customers before obtaining a complete license.

According to Angela Ang, a senior policy adviser at blockchain intelligence company TRM Labs, “it’s unsurprising that SFC plans to introduce a higher level of scrutiny than is typical during an application process, such as onsite inspections.” “The SFC may be attempting to clean house prior to the deeming arrangement taking effect, as evidenced by the recent wave of application withdrawals.”CRYPTOCASTER® - DECENTRALIZED FREEDOM!


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