SFC Warns of June 1 Deadline: Comply or Face Legal Consequences

Starting this Saturday, cryptocurrency trading platforms wishing to offer their services in Hong Kong will no longer be able to use the "grace period" set by the local regulator. If they have not obtained a license or applied for one by June 1, they will be committing a criminal offense.

SFC Warns Virtual Asset Trading Platforms as Non-Contravention Period Ends

Hong Kong's SFC has issued a statement reminding the public that the “non-contravention period” for virtual asset trading platforms (VATPs) operating in Hong Kong will end on June 1, 2024.

The regulator emphasized that all VATPs must be either licensed by the SFC or "deemed-to-be-licensed" VATP applicants under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Operating a VATP in Hong Kong without proper licensing will be considered a criminal offense, and the SFC has vowed to take action against any breaches of the law.

“Investors are urged to trade virtual assets ONLY on SFC-licensed VATPs,” the SFC advised. “They should check the ‘List of licensed virtual asset trading platforms’ on the SFC’s website to ascertain whether the VATP they are dealing with is formally licensed by the SFC.”

The regulator also cautioned that deemed-to-be-licensed VATP applicants are not formally licensed and must still demonstrate the implementation and effectiveness of their policies, procedures, systems, and controls to the SFC's satisfaction.

Deemed-to-be-licensed VATP applicants and their ultimate owners are required to comply fully with all SFC regulatory requirements and licensing conditions. The SFC expects these applicants to refrain from actively marketing their services or onboarding new retail clients until they have demonstrated compliance and obtained formal licensing.

In the coming months, the SFC will conduct on-site inspections of deemed-to-be-licensed VATP applicants to assess their compliance with regulatory requirements. The inspections will focus on client asset safeguarding and know-your-client processes.

One Year since the Crypto Market Revolution

Exactly one year ago, new regulations by the SFC came into effect, which allowed licensed entities to offer retail customers access to cryptocurrencies. Although initially, it was thought that this move could make Hong Kong a new cryptocurrency hub, only a small number of companies managed to obtain the necessary licenses to provide services.

Hong Kong crypto exchange https://t.co/XyOT2Qmhuv has shut down after failing to meet local licensing requirements effective June 1. The region's SFC required all crypto exchanges to obtain an operational license, with those failing to apply needing to cease operations by May 31.

The approaching deadline has led some firms to withdraw their license applications. Among them was Gate.io, which created an independent exchange brand, Gate.HK, to enter the local market.

Last week, Finance Magnates reported that OKX HK had also withdrawn its license application and would cease operations on May 31, 2024. The Hong Kong branch was launched at the end of March 2023, as many companies prepared to enter the local market by the beginning of June.