Hong Kong maintains 1-year ‘crypto’ exchange grace period despite scams

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Despite being rocked by multi-million-dollar digital asset scandals in recent months, the Hong Kong securities watchdog will not scrap its grace period for exchange registration.

The Securities and Futures Commission (SFC) announced a one-year grace period within its new ‘crypto’ regulations published in June. Any virtual asset service provider (VASP) operating in the special administrative region within this timeframe must obtain a license from the SFC or wind down operations. During the one-year grace period, exchanges can continue operations as they pursue their licenses.

Since then, JPEX imploded, defrauding HKD1.6 billion (US$205 million) from investors and leading to over 60 arrests. Just days ago, yet another trading platform collapsed. Hounax solicited investors through social media platforms and is estimated to have gone down with over $19 million in customer funds.

Despite the scams, SFC will not change its regulatory approach or the grace period, says CEO Julia Leung, who believes the grace period has no bearing on the current scams.

“Even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being,” she stated.

SFC committed to continue monitoring the market and social platforms in its quest to protect investors but says this won’t come at the expense of fostering innovation in emerging technology.

The SFC publicly listed all the VASP license applicants in September in a bid to be more transparent. It revealed that it had four pending applications, but only two exchanges had received the coveted license—OSL and HashKey. Big names like OKX, Huobi, and Binance have not applied for the license despite public statements on the same.

Bitget is yet another name that wasn’t on the list despite its operations in the city-state. The exchange announced in May that it had hired a compliance team specifically to work with the SFC on the license.

However, Bitget is now seeking to wind down its operations in Hong Kong. The exchange will shut down its Hong Kong-focused entity, BitgetX, in mid-December.

Some reports claim that the Singaporean exchange is shutting down BitgetX after investing in OSL, one of two licensed Hong Kong exchanges, through BGX, an affiliate firm. BGX reportedly invested $90 million for a 30% stake in OSL, making it the largest shareholder.

Meanwhile, Hong Kong police announced on Sunday that they had arrested more suspects in the JPEX scandal, bringing the total arrests to 66. However, they have all been released on bail pending investigation.

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