Rapid rise in cryptocurrency license requests observed in Hong Kong

The Securities and Futures Commission (SFC) in Hong Kong has received a total of 18 applications for crypto licenses from both local and global players over a period of two months. On February 20, Huobi HK, the Hong Kong branch of crypto exchange Huobi, applied for a virtual asset trading platform license with the SFC. Other crypto exchanges such as Crypto.com, OKX, Bybit, and DFX Labs have also filed for the same license since mid-November 2023. In order to obtain these licenses, applicants must undergo rigorous due diligence checks, including a comprehensive financial audit. This has led Web3 firms to spend up to $25 million to develop their license applications. The recent clarity on exchange licensing in Hong Kong has attracted traditional brokerages as well. Tiger Brokers, a Chinese stock brokerage, upgraded its SFC license in January to include crypto trading for professional investors and financial institutions based in Hong Kong. Additionally, the SFC received its first application for a spot Bitcoin exchange-traded fund on January 26 from Harvest Hong Kong, a major fund manager in China. As Hong Kong prepares for increased crypto adoption, licensed crypto exchanges are required to have a minimum insurance coverage of 50% for customers’ assets. OSL Exchange, for example, has partnered with Canopius, a syndicate of underwriter Lloyds of London, to provide insurance coverage for 95% of its users’ assets.