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In response to mounting concerns regarding the integrity of cryptocurrency exchanges, Hong Kong's Securities and Futures Commission (SFC) has unveiled the names of four relatively obscure cryptocurrency exchanges that are actively pursuing virtual asset licenses within the city. This revelation comes at a time when authorities are grappling with a surge in fraud allegations tied to the beleaguered JPEX exchange, which has severely eroded public trust in crypto platforms.
The four entities seeking licenses are Hong Kong Virtual Asset Exchange (HKVAX), Hong Kong Digital Asset Exchange (HKbitEX), Hong Kong BGE, and Victory Fintech. Notably, each of these exchanges has explicitly declared on their respective websites their unwavering commitment to operating in strict accordance with cryptocurrency regulations. It is important to note, however, that the SFC has issued a cautious reminder that the mere act of applying for a license does not inherently signify full regulatory compliance.
The recent JPEX debacle, characterized by an onslaught of over 2,000 complaints linked to alleged losses exceeding HK$1.4 billion (equivalent to US$183 million) in assets, has amplified the scrutiny surrounding cryptocurrency platforms operating in Hong Kong. This has significantly affected the trust and confidence of cryptocurrency investors in the market.
While numerous exchanges have publicly announced their intentions this year to pursue licenses in a bid to reassure potential customers, it is worth noting that only these four relatively lesser-known companies have formally initiated the application process. None of these entities boast the same level of recognition as the industry behemoth, Binance.
Of the four applicants, HKVAX stands out as the only one to have received an approval-in-principle from the SFC, representing a noteworthy milestone on the path toward full licensing. The company places significant emphasis on the concept of "true consensus" among all relevant parties, including regulatory authorities. HKVAX primarily targets professional and institutional investors, offering a comprehensive suite of services, including brokerage, exchange, and custodial solutions. Notably, the platform provides 100% insurance coverage for virtual assets held in custody.
HKbitEX, as one of the earliest organizations in the Asia-Pacific region to seek a virtual asset trading platform license, has a strong focus on catering to professional investors. It has also solidified its commitment to security by partnering with virtual insurer OneDegree to provide coverage for theft and hacking damages, offering protection of up to US$100 million.
Hong Kong BGE, established as a subsidiary of HKE Holdings in 2021, is still in its early stages of operation and is not yet widely accessible to the public. The platform is currently undergoing a soft launch phase, restricted to select users. In its latest financial reporting, HKE Holdings revealed losses amounting to S$10.9 million, against a revenue of S$10 million.
Victory Fintech, wholly owned by VDX Group, an exchange operator with partial ownership by Victory Securities, a financial services firm established in 1971, entered the scene in the crypto landscape. Victory Fintech submitted its license application in November 2022, which was formally accepted by regulators in February 2023. The platform is led by a highly experienced team with diverse backgrounds, encompassing traditional finance.
These developments signal a shifting regulatory landscape for cryptocurrency exchanges operating within Hong Kong. Regulatory authorities are intensifying their efforts to bolster oversight and enhance investor protection, in response to the evolving challenges posed by the cryptocurrency industry.
By fLEXI tEAM