Hong Kong's push to be seen as a major crypto hub could come under scrutiny if several or some of the 18 applicants for a license don't move past this important deadline.

Hong Kong's Securities and Futures Commission (SFC) will conduct on-site inspections of crypto trading platforms applying for licenses as a crucial deadline approaches. By June 1, 2024, all virtual asset trading platforms (VATPs) in Hong Kong must be either licensed or “deemed-to-be-licensed,” a temporary status during the full compliance process. Operating without a license beyond this date will be a criminal offense under anti-money laundering and counter-terrorism laws.

The inspections will focus on compliance with SFC’s regulatory requirements, particularly client asset safeguarding and know-your-client processes. Currently, only OSL Digital Securities Limited and Hash Blockchain Limited are licensed by the SFC, with 18 applications pending and 11 either withdrawn or removed. Crypto exchanges OKX and Huobi Hong Kong have recently withdrawn their applications.

The SFC does not expect applicants to market their services or onboard new retail clients before obtaining full licenses. Angela Ang from TRM Labs noted that the increased scrutiny, including on-site inspections, is expected, and the recent application withdrawals might be an effort to ensure compliance before the deeming arrangement takes effect.