Crypto contenders failing to clear the bar

Bloomberg and staff reporter

Hong Kong’s Securities and Futures Commission found unsatisfactory practices at some of the “deemed-to-be-licensed” crypto exchange platforms during on-site inspections carried out since they won the designation in June, people familiar with the situation said.

The city’s push for a digital-asset hub faces growing pains amid uncertainty over whether 11 crypto exchanges will all achieve full licenses after earlier receiving initial approvals.

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, the people said.

The 11 deemed-to-be-licensed exchanges include global players such as Crypto.com and Bullish, as well as HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin and Matrixport HK.

It’s unclear which firms fell short of the SFC’s requirements.

An SFC spokesperson said that while the agency doesn’t comment on specific cases, the inspections were carried out to ascertain whether applicants adhered to its requirements, “with a particular focus on their safeguarding of client assets and know-your-client processes.”

Full licenses are expected to be issued around the end of 2024. Only two crypto platforms – OSL and HashKey – are fully licensed in Hong Kong at present.

This came as the SFC saw its deficit narrow by 63 percent to HK$36.9 million for the three months ended June from a year ago.

Income grew 26 percent to HK$521.9 million during the quarter from the previous year, helped by rising levies and investment income.

Hong Kong-domiciled funds saw net fund inflows up 80 percent for the June quarter from the previous quarter, SFC said.