- SFC faults methods of protecting client assets and cybersecurity risks.
- Only two crypto firms have a full license in Hong Kong
Hong Kong’s Securities and Futures Commission (SFC) has reportedly found “unsatisfactory practices” on up to 11 crypto exchanges seeking a full license. On-site inspections by the regulator found some firms with weak controls on cyber risks and client assets custody. The report states:
“Some of the crypto firms are overly reliant on a handful of executives to oversee the custody of client assets, while others aren’t properly guarding against cybercrime risks.”
A spokesperson of SFC says the inspections are still ongoing and subject to change. Crypto firms that are unable to address the deficiencies discovered during on-site inspections may see their deemed license status revoked or their licenses declined.
It is not clear which crypto entities have been flagged for “critical deficiencies.” However, exchanges such as Crypto.com, PantherTrade, HKbitEX, and Bullish had applied for a full license.
See Related: Hong Kong’s Regulator Receives The Initial Filing For The First Spot Bitcoin ETF
Flagged Firms And Full License Status
Should the flagged firms fail to attain full license status, it will challenge Hong Kong’s attempts to become a crypto hub. Although many crypto exchanges have received initial approvals to operate in the region, they have yet to earn full licenses.
Hong Kong criminalized crypto firms operating unlicensed virtual asset trading platforms on June 1. SFC said it would pursue firms violating the regulation.
HashKey and OSL are the only firms with full licenses in Hong Kong, while OKX and ByBit are among 12 firms that have withdrawn their applications following SFC inspections.