Hong Kong Securities and Futures Commission to conduct compliance inspections at cryptocurrency companies’ offices following license deadline

The Securities and Futures Commission (SFC) in Hong Kong has announced that it will carry out on-site inspections of local virtual asset trading platforms (VATPs) that have yet to complete their regulatory applications before the June 1 licensing deadline. In a reminder issued on May 28, the SFC emphasized that all crypto companies must obtain a license or be considered “deemed-to-be-licensed” by the SFC after the deadline. Under a short-term framework, the “deemed-to-be-licensed” applicants will be subject to regulations designed for crypto firms that were already operating in the region prior to the licensing regime. Operating an unlicensed VATP in Hong Kong after June 1 will be a criminal offense, and the SFC will conduct on-site inspections to ensure compliance with regulatory requirements while the deemed-to-be-licensed VATP applicants continue their application process. The SFC will focus specifically on how these firms are protecting client assets and implementing Know Your Customer (KYC) processes. The SFC has urged investors to only trade crypto on platforms licensed by the SFC and cautioned companies seeking licenses against actively marketing services or onboarding new retail clients until formally licensed. Additionally, they must prevent mainland Chinese residents from accessing their services. As of now, only two companies, OSL Digital Securities Limited and Hash Blockchain Limited, have been granted a license to operate in Hong Kong, while 18 applications are still pending approval. Earlier this month, 11 crypto companies and exchanges, including OKX and Huobi’s local arm, withdrew their applications ahead of the deadline. Gate.HK, a crypto exchange, suspended new user acquisitions, marketing activities, and deposits and began delisting tokens on May 23. It intends to relaunch its services after reconstructing its platform to comply with Hong Kong’s regulatory requirements. The SFC is now facing a challenging battle against the legal firepower of the crypto industry.