Hong Kong virtual asset exchanges add 4 new members, a quick overview of each background and the latest regulatory direction
After OSL Exchange, HashKeyExchange, and HKVAX, Hong Kong's licensed virtual asset trading platform (VATP) welcomes four new members.Author: Nancy, PANews
After OSL Exchange, HashKey Exchange, and HKVAX, Hong Kong's licensed virtual asset trading platform (VATP) welcomes four new members. On December 18, the Hong Kong Securities and Futures Commission (SFC) announced the issuance of licenses to four virtual asset trading platforms under a fast-track licensing process, including Cloud Account Greater Bay Area Technology (Hong Kong), DFX Labs, Hong Kong Digital Asset Trading Group, and Thousand Whales Technology.
At the same time, the Hong Kong SFC is accelerating the approval process for virtual asset licenses and formulating a clear roadmap for the licensing procedure to further expand Hong Kong's footprint in the Web3 space.
Four Platforms Licensed by the Hong Kong SFC
This time, the Hong Kong SFC has approved four platforms at once, bringing the total number of licensed virtual asset trading platforms in Hong Kong to seven.
HKbitEX: Founded by former HKEX official, has secured tens of millions in funding
HKbitEX is launched by Hong Kong Digital Asset Trading Group Limited and was established in 2019. It is dedicated to providing compliant and regulated digital asset spot trading and over-the-counter (OTC) trading platforms for global professional investors.
It is reported that the parent company behind Hong Kong Digital Asset Trading Group is Taiji Capital Group, which mainly provides tokenized asset services, including three major sectors: capital markets and wealth management, digital asset exchanges, and Web3 SaaS and technology development. In September 2023, Taiji Capital announced the launch of Hong Kong's first real estate fund security token offering (STO), with its subsidiary Pioneer Asset Management issuing the token PRINCE, aiming to raise approximately HKD 100 million at that time. Taiji Capital's founder, Gao Han, previously worked at HKEX, primarily responsible for promoting HKEX products in mainland China, including Stock Connect and Bond Connect, and Taiji Capital has also attracted several senior executives from HKEX.
As one of the first institutions to apply for a virtual asset trading platform license from the Hong Kong SFC, HKbitEX has secured multiple rounds of financing, including in December 2020, when HKbitEX announced the completion of a USD 10 million Series A2 financing round, led by Axion Global Investment Limited, a subsidiary of a Hong Kong-listed company, and Hanwha Asset Management, with other participants including Deding Innovation Fund, Jianfeng Capital Management, Lenovo Capital, and Lingfeng Capital; in November 2021, HKbitEX announced the completion of a USD 9 million Pre-B financing round with a total of USD 30 million.
Accumulus: Backed by a Fortune 500 company in China
The virtual asset trading platform Accumulus is launched by Cloud Account Greater Bay Area Technology (Hong Kong) Limited and began operations in Hong Kong in April 2023, officially submitting its application for a virtual asset trading platform license to the Hong Kong SFC by the end of the same year.
Cloud Account Hong Kong is registered by Cloud Account and is the only overseas business headquarters. The group has obtained a direct investment quota of RMB 985 million approved by the National Development and Reform Commission and others, supporting Cloud Account Hong Kong to focus on expanding its business in Web 3.0. According to official information, Cloud Account is China's largest online human resources service company, serving 110 million new employment-type workers (freelancers) from 138 countries and regions, and was selected as one of the "2024 China Top 500 Enterprises" with a revenue of RMB 108.4 billion this year.
DFX Labs: Team with years of blockchain experience
DFX Labs (DFX Labs Company Limited) is the last applicant for a Hong Kong virtual asset trading platform last year. The team at DFX Labs has extensive experience in the blockchain and fintech fields; for example, Chief Operating Officer Simon Au Yeung previously served as CEO of Blockchain Finance and virtual asset trading platform BGE, as well as co-chair of IEEE Hong Kong, while Chief Technology Officer David H. has worked at Morgan Stanley, Dell Technologies, and HashKey Group.
EX.IO: Internet brokerage under Sina as a major investor
Thousand Whales Technology (BVI) Limited launched EX.IO (formerly known as xWhale), which is Hong Kong's first and only licensed institution with a brokerage background, with Sina's internet brokerage Huasheng Capital Group as the main investor, along with investments from Longling Capital and Weixin Jinke (HKG: 2003). EX.IO was initially named xWhale and was established after a strategic agreement between the original Web3 trading platform BusyWhale and Huasheng Securities in May last year.
Release of a six-step licensing procedure roadmap, a consultation group to be established early next year
Although Hong Kong has shown a strong determination to develop Web3 and has attracted many crypto ecosystem projects/platforms to apply for membership, there have been instances of licenses being revoked during the transition period for license applications. By June, only 11 platforms were considered as applicants for licenses, and the challenges faced by Hong Kong are not to be overlooked.
To enhance approval efficiency and ensure compliance, Hong Kong launched an inspection program in June this year and completed relevant on-site inspections for all licensed applicants, achieving direct results. Therefore, the Hong Kong SFC decided to continue this practice when appointing external evaluation experts for the second phase of assessment for virtual asset trading platforms.
"The SFC has been actively communicating with the senior management and ultimate controllers of virtual asset trading platforms, which helps us clarify the regulatory standards that need to be met and expedite the regulatory standards for virtual asset trading platforms," said Ye Zhiheng, Executive Director of the Intermediaries Division of the Hong Kong SFC.
In the latest circular, the Hong Kong SFC has also formulated a clear roadmap for the licensing procedure for virtual asset trading platforms:
On-site inspection and provision of feedback, requiring the platform to submit a corrective action plan.
After reaching consensus on the corrective plan, a conditional license will be granted, and the platform must continue to implement corrective measures according to the plan, conduct penetration testing and vulnerability assessments, and obtain satisfactory results before operating within a restricted business scope.
Penetration testing and vulnerability assessments should be conducted by independent third parties, and the platform's management must ensure that all significant and critical corrective measures continue to be taken.
After completing corrective measures, vulnerability assessments, and testing, the platform may be allowed to operate under a restricted business scope.
The platform must hire external experts to evaluate the revised policies and procedures (including revised procedures and monitoring), and the SFC will oversee the entire second phase assessment process, clarifying regulatory requirements and providing feedback on the assessment results.
The SFC will revoke the conditions related to the restricted business scope after the completion of the second phase assessment, which will focus on ensuring that the policies, procedures, systems, and monitoring measures (policies and procedures) of the virtual asset trading platform are appropriately designed and implemented, and will be conducted through direct verification.
"We are striving to regulate this emerging market, but it is no easy task, as it is a vast existing market with advanced technology, no borders, and imperfect regulation. The Hong Kong SFC will establish a formal consultation group for all licensed platforms in early 2025, with each licensed institution appointing senior personnel as representatives. This will allow the Hong Kong SFC to fully listen to and consider their views. This will enable us to brainstorm and systematically prioritize development matters based on investor protection," Ye Zhiheng previously revealed, and the Hong Kong SFC has also recently disclosed that it will provide more guidance on the licensing scheme for new entities applying for a second virtual asset trading platform license in early 2025.
