A Hong Kong lawmaker shared his personal opinion on the Hong Kong VASP license, noting that there are several issues associated with it, meaning it is not beneficial for crypto companies.
Hong Kong is a crypto-friendly jurisdiction. In mid-2023, the Hong Kong securities regulator introduced a crypto-focused regulatory framework to legalize crypto trading for retail investors and also invited top crypto companies to set up their crypto businesses in Hong Kong under clear rules and laws.
So far, major crypto exchanges such as Bybit, Binance, OKX, Gate, and HTX, etc., have withdrawn their pending crypto license applications with the Hong Kong securities regulatory body. At the time, many speculations emerged into the public domain behind such decisions, but no crypto company spoke about the main reason behind their departure from a crypto-friendly jurisdiction.
Currently, only two Chinese crypto companies operate services with a Hong Kong crypto license, while 11 crypto companies are awaiting approval.
On such news, a Chinese crypto blogger Colin Wu reported that the Hong Kong SFC needs virtual asset trading platforms to promise that they will not serve Chinese users from any region in the mainland, be it Hong Kong or another country. This rule makes it difficult for offshore exchanges to comply. Major crypto exchange OKX tried to form an industry alliance to oppose this rule, but failed.
Some industry insiders say the withdrawn entity can reapply for a VASP license under a new legal entity or framework in the future, but it cannot use a brand similar to offshore exchanges.
On Hong Kong’s crypto licensing system, Hong Kong Legislative Council Member David Chiu said Hong Kong’s cryptocurrency licensing system has been criticized for undermining market confidence. Prominent exchanges such as Binance and OKX are struggling to secure licenses, and even those that manage to obtain them face significant challenges in achieving profitability.
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