The first licences under Hong Kong’s new crypto regime went to HashKey Exchange and OSL, legalising the retail trading of tokens in the city as officials seek to foster a global hub for the digital-asset sector.
HashKey will be able to “expand its business scope from serving professional investors to retail users” after receiving an upgrade of its existing licences, the company said in an Aug 3 statement. A spokesperson at the Securities and Futures Commission said the licencee “shall at all times be in compliance with the requirements” of the Guidelines for Virtual Asset Trading Platform Operators, which went live in June.
Hong Kong started a mandatory crypto framework this summer in an effort to restore its image as a cutting-edge financial centre. The pivot stirred substantial interest and contrasts with a US digital-asset clampdown, but the city has yet to win big investments from an industry chastened by a market rout last year.
HashKey said it has partnered with Standard Chartered to provide fiat currency deposit and withdrawal services. The company also announced the launch of its virtual asset over-the-counter trading service.
HashKey and OSL were the only two crypto exchanges with permits under Hong Kong’s earlier voluntary licensing program.
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“This is a significant first-mover advantage,” OSL Chief Executive Officer Hugh Madden said in a statement announcing that retail investors can now trade on its platform, starting with Bitcoin and Ether.
HashKey Group operates in areas from venture funding to asset management and trading. The firm was in early-stage talks to raise US$100 million ($134.2 million) to US$200 million at a valuation above US$1 billion, Bloomberg News reported in May.
Under Hong Kong’s new rules, crypto exchanges can offer trading to individuals and institutions if they secure and comply with licences intended to curb the risky practices exposed by the 2022 crash and the collapse of the FTX platform.
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Retail investors are restricted to larger coins like Bitcoin and Ether that feature in at least two recognised, investable indexes. Requirements for risk assessments, insurance cover and asset custody could add to operating costs for the exchanges.
Cautious Reception
Crypto businesses are proceeding cautiously with new investments after a US$1.8 trillion slump in token prices from a 2021 peak and thousands of job losses.
In a Bloomberg News survey in May, 15 major digital-asset outfits — including key exchanges that accounted for the vast bulk of crypto trading volumes — refrained from elaborating on specific investment plans for Hong Kong.
At the same time, the SFC has received dozens of inquiries and crypto firms such as Huobi, OKX and Amber Group have said they plan to apply for licences. Hong Kong offers not just a local market but also a conduit to Chinese wealth, particularly if Beijing ever loosens a ban on crypto trading on the mainland.
The digital-asset industry is increasingly turning to Asia for growth opportunities as the region clarifies regulations. Hong Kong, Japan, Singapore and South Korea are among the jurisdictions seeking to woo crypto businesses.
They face competition from the likes of Dubai and the European Union. The US, meanwhile, is mired in a crypto fog caused by contradictory court judgments, a turf war between regulatory agencies and disputes about proposed legislation.
