Challenges Faced by Crypto Exchanges in Hong Kong

The rush for operational licenses by crypto exchanges in Hong Kong seems to be decelerating, as recent withdrawals raise uncertainties about the future of digital asset trading in the region. On May 13, both IBTCEX and QuanXLab, prominent crypto exchanges, surprisingly withdrew their license applications from the Securities and Futures Commission of Hong Kong (SFC). This action followed their initial applications in February 2024. Subsequently, Huobi HK, affiliated with HTX, also withdrew its application the next day, contributing to a growing number of withdrawals. Seven crypto exchanges have retracted their license applications in 2024, casting doubts on the already dynamic market. Nonetheless, the reasons behind these withdrawals remain undisclosed on the HKSFC’s official platform. With the imminent deadline of May 31st, exchanges without licenses must halt operations in Hong Kong. In contrast, 21 crypto exchanges are in line for licensing approval, including global players like Bybit, Crypto.com, Matrixport HK, HKX, and OKX. A recent applicant, Bitcoin World Technology Limited, submitted an application on behalf of the “bitcoinworld” crypto exchange on May 17. The regulatory environment in Hong Kong is rapidly evolving, with the recent introduction of a pilot program for the digital yuan by the Hong Kong Monetary Authority (HKMA). This marks the first rollout of a Central Bank Digital Currency (CBDC) outside mainland China. Hong Kong residents can now create e-CNY wallets using their mobile numbers for cross-border payments through participating banks. However, these wallets are currently limited to facilitating cross-border transactions and do not support person-to-person transfers. The ongoing pilot program aims to enhance e-CNY wallet functionalities, allowing direct transactions and fund deposits from 17 retail banks via the Faster Payment System (FPS). Eddie Yue, Chief Executive of the HKMA, mentions ongoing efforts to drive broader adoption among retail merchants, signaling a positive outlook for the integration of the digital yuan into Hong Kong’s financial ecosystem. While the regulatory landscape evolves, the fate of crypto exchanges in Hong Kong hangs in the balance, with stakeholders closely observing as the May 31st deadline nears.