According to a Bloomberg report, Hong Kong has received applications from 24 companies seeking licenses to operate crypto exchanges in the city as it strives to establish itself as a regulated hub for the cryptocurrency industry.
Notable players such as Bybit, OKX, and Crypto.com are among the applicants, while Binance, Coinbase, and Kraken are absent. However, the city’s virtual asset rulebook, which prioritizes investor protection, comes with compliance costs that could be challenging for some companies.
Binance, Coinbase Omit Hong Kong’s Crypto License Race
Per the report, the list of applicants includes well-known players in the digital asset space, such as Gate.io, HTX, and Bullish, which have demonstrated notable trading volumes. Nonetheless, the absence of major exchanges like Binance, Coinbase, and Kraken raises questions about their strategic decisions regarding Hong Kong.
The list of applicants serves as a gauge of industry sentiment, indicating the confidence level in Hong Kong’s regulatory framework. Angela Ang, senior policy advisor at blockchain intelligence firm TRM Labs, sees the presence of recognized players as a positive sign.
Notably, Hong Kong’s 24 applicants for exchange licenses lag significantly behind Singapore, where some 70 companies have officially applied for a license by the end of 2021, three times the number of applicants in Hong Kong so far.
However, the true measure of Hong Kong’s success will depend on the investments these companies make in the local market. Compliance costs associated with operating a regulated business in the digital asset industry are inevitable and must be factored into long-term strategies.
OTC Trading Dominates Crypto Inflows In Hong Kong
The report notes that Hong Kong has shifted its focus to becoming a cryptocurrency hub in late 2022, aiming to showcase its technological capabilities and secure its future. Currently, HashKey Exchange and OSL Group are the city’s only authorized digital asset exchanges.
However, most digital flows into Hong Kong have occurred over-the-counter (OTC) trading rather than digital asset exchanges. Chainalysis data shows that around $64 billion of crypto entered Hong Kong through OTC channels last year.
The government reportedly wants to regulate OTC outlets that facilitate cash-to-crypto transactions with minimal oversight. In addition, Hong Kong is exploring regulations for stablecoins and considering introducing exchange-traded funds (ETFs) that invest directly in selected cryptocurrencies.
Overall, the ongoing development of Hong Kong’s digital asset exchange sector and the influx of applications for operating licenses reflect the city’s ambition to become a regulated hub for the cryptocurrency industry.
However, the compliance costs associated with operating a regulated business pose challenges that companies must consider.
In light of this latest development, Bitcoinist previously reported that HTX has withdrawn from its efforts to secure a cryptocurrency exchange license in Hong Kong. According to the report, three other cryptocurrency exchange operators have also withdrawn their applications.
Featured image from Shutterstock, chart from TradingView.com