TLDR
- BitMart withdrew its VASP license application in Hong Kong following stringent regulatory requirements.
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The move follows similar withdrawals by Bybit, OKX, and Gate, amid tougher rules.
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Hong Kong crypto exchanges must meet high liquidity and cold storage requirements to gain licenses.
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Hong Kong aims to be a crypto hub but stricter regulations impact some firms’ operations.
Cryptocurrency exchange BitMart has officially withdrawn its application for a Virtual Asset Service Provider (VASP) license in Hong Kong. The company’s decision comes amidst the backdrop of increasing scrutiny on crypto platforms seeking to operate in the region. The Hong Kong Securities and Futures Commission (SFC) confirmed that BitMart pulled its application, making it one of several major exchanges to abandon the licensing process in recent months.
Hong Kong has positioned itself as a global crypto hub, aiming to foster a robust regulatory framework for digital asset firms. However, recent regulatory hurdles, including strict liquidity and capital requirements, have proven difficult for many exchanges. BitMart’s withdrawal signals the growing challenges faced by crypto exchanges trying to meet these stringent standards.
Challenges Facing Crypto Exchanges in Hong Kong
Hong Kong’s regulatory environment for crypto exchanges has become significantly stricter, requiring platforms to adhere to robust standards.
The rules mandate that exchanges maintain liquid assets equivalent to at least 12 months of operating expenses, alongside a paid-up share capital of at least 5 million Hong Kong dollars ($641,490). Furthermore, 98% of client assets must remain in cold storage, and transfers are restricted to whitelisted addresses.
These stringent requirements have led to several crypto platforms reconsidering their operations in Hong Kong. Notably, other exchanges like Bybit and OKX withdrew their applications earlier this year, citing similar challenges in meeting the high regulatory demands. These developments reflect the broader regulatory trend in Hong Kong, where crypto firms are required to prove they can handle large-scale operations while ensuring compliance with strict rules.
Hong Kong Aspiration to Be a Crypto Hub Amid Tough Regulations
Despite these regulatory challenges, Hong Kong’s government continues to push forward with its vision to be a leading crypto hub. The Securities and Futures Commission has awarded licenses to several platforms, including PantherTrade, YAX, and Bullish, signaling the government’s commitment to supporting the crypto industry while ensuring that firms operate under strict regulatory frameworks.
Additionally, Hong Kong has been working on regulations for stablecoin issuers. The Hong Kong Monetary Authority recently finalized its stablecoin framework, ensuring that any issuers comply with rigorous standards. While this is seen as a positive step for building a secure financial ecosystem, the new regulations have also caused some local companies to report losses. This reflects the broader tension between maintaining stringent rules and encouraging growth in the crypto sector.
