Hong Kong's goal to become a leading hub for Web3 and cryptocurrency is facing hurdles as some top global exchanges have pulled out of the licensing process overseen by the Securities and Futures Commission (SFC).

Major Players Withdraw Applications

According to local reports, prominent exchanges like Binance, Huobi, and OKX decided to withdraw their applications in late May. Eleven exchanges in total have removed themselves from consideration, leaving only 11 contenders remaining.

The SFC requires all virtual asset trading platform license applicants to pledge that they do not serve mainland Chinese users. This requirement has proven difficult for traditional offshore exchanges to meet. OKX even tried to form an industry group to challenge this rule but did not succeed.

Industry insiders suggest that those who withdrew might reapply later with revised legal frameworks, but they must avoid using names similar to their offshore counterparts.

Future of Hong Kong’s Web3 Dreams

The departure of OKX has led some in the crypto community to question whether Hong Kong's Web3 aspirations are still viable.

Some local commentators on WeChat have criticized the authorities for being overly cautious with the new system. They argue that a conservative approach, rooted in traditional finance, has made the licenses less competitive and flexible. As a result, some applicants withdrew despite significant investments.

The article highlights several issues with the new licensing system. Policies related to the virtual asset market, such as VATP, stablecoin issuance, and over-the-counter trading, were developed by different departments without a unified strategy. These policies were introduced at different times, resulting in a staggered implementation that has struggled to keep up with fast-paced technological advancements.

In conclusion, while Hong Kong aimed to be a prime destination for Web3 and crypto, the current licensing challenges and cautious regulatory approach have caused some major exchanges to reconsider their plans. The future of Hong Kong’s Web3 ambitions remains uncertain as the industry waits to see how these issues will be addressed.