Hong Kong Securities and Futures Commission (SFC) Approves Four New Virtual Asset Trading Platforms (VATPs)
The Hong Kong Securities and Futures Commission (SFC) has made significant strides in the virtual asset ecosystem by approving four new firms as virtual asset trading platforms (VATPs). This move brings the total number of approved VATPs to eight, with four more joining HashKey, OSL, and HKVAX. The SFC’s rigorous licensing process ensures that only qualified exchanges are granted licenses.
A Refined Licensing Process
The newly approved exchanges – Accumulus GBA Technology (Hongkong), DFX Labs, Hong Kong Digital Asset EX, and Thousand Whales Technology (BVI) – underwent a thorough examination by the SFC. This included on-site inspections and a review of their Know Your Customer (KYC) processes, cybersecurity measures, and client asset protection protocols.
The inspections were carried out to ensure that these exchanges meet the regulatory standards set by the SFC. The agency aims to strike a balance between safeguarding investor interests and promoting the development of the virtual asset ecosystem.
SFC Executive Director Eric Yip’s Insights
Eric Yip, executive director of intermediaries at the SFC, emphasized the importance of engaging with VATPs’ senior management and ultimate controllers. This proactive approach enables the agency to drive home its regulatory expectations and expedite the licensing process.
Yip also highlighted the SFC’s commitment to supervising the virtual asset ecosystem: "We have been proactively engaging with VATPs’ senior management and ultimate controllers which helps drive home our expected regulatory standards and expedite our licensing process for VATPs."
The Newly Approved Exchanges
The four new exchanges are licensed to deal with securities, provide automated trading services, and operate a VATP. However, they will operate under a restricted scope until further notice.
To lift operating restrictions, the exchanges must perform vulnerability assessments and penetration tests through an independent third party with satisfactory results. The SFC will supervise this process to ensure compliance.
The Expectations of the SFC
On December 18, the SFC released a circular outlining its expectations for VATPs. This document provides clarity on the regulatory standards that these exchanges must meet.
VATP Licensing Process
The VATP licensing process is a crucial aspect of the SFC’s regulatory framework. The agency strives to maintain a balance between innovation and investor protection.
Related Developments
Eleven VATPs remain in the applicant pool, with seven being deemed-to-be-licensed exchanges. This status indicates that these exchanges conform to Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
Potential for Further Approvals
The SFC is expected to grant licenses to additional exchanges as part of its roadmap through 2026. The agency aims to advance regulation, promote real-world asset tokenization, and explore blockchain technology.
Cryptocurrency Availability in Hong Kong
Currently, only four cryptocurrencies are available for purchase in Hong Kong: Bitcoin (BTC), Ether (ETH), Avalanche (AVAX), and Chainlink (LINK). Retail cryptocurrency trading was legalized in Hong Kong in August 2023.
Regulatory Developments in the Virtual Asset Ecosystem
The SFC’s efforts to regulate the virtual asset ecosystem have led to significant developments in the field. The agency continues to work towards creating a robust regulatory framework that balances innovation with investor protection.
Conclusion
The approval of four new VATPs by the Hong Kong Securities and Futures Commission marks an important milestone in the development of the virtual asset ecosystem. The SFC’s commitment to supervising this sector ensures that only qualified exchanges are granted licenses, safeguarding investor interests and promoting innovation.
Recommended Reading
For those interested in staying up-to-date on regulatory developments in the virtual asset ecosystem, we recommend exploring more articles like this one. Our Law Decoded newsletter provides valuable insights into crypto laws and guidelines, empowering readers to make informed decisions for their crypto ventures.
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