• Crypto & Funx
• 14 Sep, 2024

Hong Kong’s SFC aims to grant full licenses to more crypto exchanges by the end of 2024.

Currently, only three exchanges hold full licenses, while 11 others await approval after provisional permits.

The government introduced AI policy guidelines to advance AI’s integration into financial markets.

Hong Kong’s Securities and Futures Commission (SFC) announced plans to license more cryptocurrency exchanges by the close of 2024. Eric Yip, the SFC’s Executive Director for Intermediaries, this update during Hong Kong’s annual Fintech Week event, where he also provided insight into the city’s ongoing regulatory efforts.

According to Yip, the commission has been working closely with applicants, offering feedback that has led many exchanges to dedicate enough resources to ensure full compliance with regulatory standards.

Notably, the city launched its digital-asset licensing framework in June 2023, opening the doors for retail crypto trading on licensed platforms. However, only three platforms, HKVAX, HashKey, and OSL, have received full licenses so far. An additional 11 are currently operating under a provisional permit, awaiting final approval after meeting the SFC’s compliance requirements.

The regulator is setting to complete the licensing process and finalize the list of fully licensed exchanges by the end of December.

SFC Tightens Oversight

The regulatory journey hasn’t been straightforward for the crypto exchanges under review. During inspections, the SFC identified multiple compliance issues among these “deemed-to-be-licensed” platforms. In October, the agency’s Chief Executive, Julia Leung, that these inspections highlighted areas where firms fell short of compliance.

After making the necessary changes, the firms will be granted operational licenses. However, Yip stated that full operational freedom would only come after exchanges complete a thorough third-party review in collaboration with the SFC.

By early 2025, the SFC plans to establish a consultative panel with these licensed exchanges, fostering a collaborative regulatory environment that prioritizes investor protection and market stability.

During this rigorous licensing process, several major exchanges, such as OKX, Gate.io, and HTX, have opted to withdraw their applications, pointing to regulatory challenges. However, companies like Bullish and Crypto.com remain listed as license applicants on the SFC’s website, underscoring ongoing interest in Hong Kong’s cryptocurrency sector.

New Policies for AI in Finance

Along with expanding its crypto licensing, Hong Kong is also advancing regulatory measures for artificial intelligence (AI) within finance. In a separate statement on Monday, government officials outlined the city’s first set of AI policy guidelines aimed at driving AI’s role in financial markets and other critical sectors. These guidelines encourage regulatory agencies to establish a unified framework for AI implementation.

Additionally, Hong Kong introduced tax incentives geared toward cryptocurrencies as part of its ongoing efforts to attract global crypto talent. Secretary for Financial Services and the Treasury Christopher Hui Ching-yu described Hong Kong’s financial sector as uniquely positioned to support AI adoption due to its “sizable markets and rich scenarios”. He affirmed the government’s commitment to enacting legislation by the year’s end.