Hong Kong’s Securities and Futures Commission (SFC) has announced plans to issue more licenses for crypto asset exchanges by the tip of 2024.

This decision comes after a five-month evaluation period, during which only three platforms received full licenses and 11 held provisional licenses, raising initial concerns about the opportunity of further approvals.

Hong Kong Promoting a Crypto-Friendly Environment

During Hong Kong’s annual Fintech Week event, Eric Yip, the chief director of intermediaries on the SFC, revealed that the regulatory body intends to publish a final list of licensed exchanges by year-end.

This move signals a pivotal step in town’s ambition to determine itself as a digital asset hub in Asia. Notably, Hong Kong has been actively working to revamp its appeal as a financial center, especially following recent political challenges.

Town’s ambition to advertise a crypto-friendly environment has been met with interest and caution, as regulatory concerns have slowed the licensing process for brand spanking new crypto exchanges.

Yip noted that almost all applicants have responded to the SFC’s feedback by committing to improvements of their operational practices, including implementing regulatory changes to support investor protection and promote transparency within the digital asset space. In his words:

The applicants and their controllers have by and huge taken up our feedback, they usually are willing to commit resources to rectify issues and take a long-term view in developing their business in a regulated environment.

Path to Licensing and Regulatory Developments

Once these exchanges meet the SFC’s requirements, they will likely be granted licenses to operate with certain restrictions. These exchanges are expected to undergo a third-party review in collaboration with the SFC before the restrictions are lifted, in accordance with Yip.

The ultimate licensing phase goals to be sure that the exchanges meet stringent regulatory standards, addressing previously identified shortcomings of their operational practices.

A consultative panel will likely be formed by early 2025, consisting of authorized exchanges and the SFC. This panel will promote closer regulatory cooperation and supply an avenue for ongoing dialogue between exchanges and regulators.

Along with licensing efforts, Hong Kong is developing a regulatory framework targeting over-the-counter (OTC) crypto trading platforms and custodians. This framework seeks to create a “safer and more regulated environment” for institutional investors and retail users.

Yip highlighted the importance of structured regulations in maintaining Hong Kong’s position as a competitive financial center, particularly because the region continues to draw a rising variety of digital asset businesses on the lookout for regulatory clarity and stability.

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