Hong Kong's Securities and Futures Commission (SFC) has discovered "unsatisfactory practices" at several cryptocurrency exchanges that are applying for full licenses in the region, following on-site inspections. These findings, reported by Bloomberg, highlight issues such as overreliance on a small number of executives to manage client assets and inadequate safeguards against cybercrime.
The SFC has warned that platforms failing to address "critical deficiencies" identified during these inspections may face the revocation of their temporary licenses or outright rejection of their license applications. Although the SFC has not disclosed the names of the entities involved, 11 firms are currently seeking full licenses, including notable names like Crypto.com, HKbitEX, PantherTrade, and Bullish.
The inspections are part of the SFC’s broader effort to ensure that cryptocurrency exchanges meet the necessary regulatory standards, especially as Hong Kong aims to establish itself as a global hub for crypto trading. However, the latest findings could complicate these ambitions, particularly given the recent withdrawal of licensing applications by 12 entities, including major players like OKX and ByBit.
This development comes after the SFC announced in late May that it would conduct thorough inspections of crypto trading platforms interested in continuing their licensing applications. As of now, only OSL and HashKey have received full licenses to operate in Hong Kong.
The situation remains fluid, and the SFC may take further actions depending on the ongoing inspections. For now, the regulator has refrained from commenting on specific cases but has indicated that its scrutiny of the crypto sector will continue as part of its regulatory oversight.