The Hong Kong Securities and Futures Commission (SFC) has announced that it will conduct on-site inspections of local virtual asset trading platforms (VATPs) that are still going through their regulatory applications after the June 1 licensing deadline. This move is part of the SFC's efforts to ensure that all crypto firms operating in Hong Kong are fully compliant with the region's regulatory requirements.

As of June 1, all local crypto trading platforms must either be licensed or "deemed-to-be-licensed" by the SFC. The latter category applies to crypto firms that were already operating in the region before the licensing regime was enacted and are still pursuing their applications. The SFC has warned that operating an unlicensed VATP in Hong Kong would be a criminal offense after the deadline.

The SFC's on-site inspections will focus on ensuring that crypto firms are safeguarding client assets and undertaking Know Your Customer (KYC) processes in accordance with regulatory requirements. The regulator has also urged investors to only trade crypto on SFC-licensed platforms and has advised companies seeking licenses not to actively market their services or onboard new retail clients until they are formally licensed.

Eleven crypto companies and exchanges, including OKX and Huobi's local arm, have withdrawn their applications ahead of the deadline, while 18 applications are still pending approval. Only two companies, OSL Digital Securities Limited and Hash Blockchain Limited, have been granted a license to operate in Hong Kong so far.

The SFC's move to conduct on-site inspections is a significant step in its efforts to regulate the crypto industry in Hong Kong. The regulator has been working to establish a clear and comprehensive regulatory framework for crypto firms, and the licensing regime is a key part of this effort.

Under the licensing regime, crypto firms must meet certain requirements and standards in order to be granted a license to operate in Hong Kong. These requirements include ensuring the safety and security of client assets, implementing effective KYC and anti-money laundering (AML) measures, and demonstrating a strong commitment to regulatory compliance.

The SFC's on-site inspections will help to ensure that crypto firms are meeting these requirements and are operating in accordance with regulatory standards. The inspections will also provide the SFC with valuable insights into the operations of crypto firms and help the regulator to identify any potential risks or concerns.

In related news, El Salvador's plans to embrace Bitcoin and artificial intelligence could potentially boost its GDP tenfold by 2029, according to ARK Invest CEO Cathie Wood. Wood praised El Salvador for being an "oasis" for Bitcoin and AI adoption, and noted that the country's determination to integrate these technologies into its economy could lead to significant economic growth.

The country's efforts to embrace crypto and AI have been driven by its president, Nayib Bukele, who has been a vocal advocate for the potential of these technologies to drive economic growth and development. Bukele has also been working to establish El Salvador as a hub for crypto and AI innovation, and has launched a number of initiatives aimed at attracting investment and talent to the country.

Overall, the SFC's move to conduct on-site inspections of crypto firms in Hong Kong is a significant step in its efforts to regulate the crypto industry and ensure that firms are operating in accordance with regulatory standards.