Hong Kong allows retail investors to buy and sell virtual assets on two exchanges, and one company’s stock price has risen by more than 60%.Hong Kong permits retail investors to trade virtual assets on two exchanges, and a company's stock price has surged over 60%.
On August 3rd, Hong Kong cryptocurrency exchanges HashKey and OSL announced on the same day that they have obtained the approval to upgrade their licenses from the Hong Kong Securities and Futures Commission (SFC) to expand their business scope from professional investors to retail investors.
Industry analysts believe that this event is of great significance and HashKey and OSL will gain a first-mover advantage.
As a result of this news, the stock price of BC Technology Group, the parent company of OSL, rose by 63.26% on August 4th.
Hong Kong approves two exchanges to serve retail traders
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On August 3rd, virtual asset trading platform HashKey Exchange announced on its official website that its licenses, HashKey Exchange License No. 1 and No. 7, have been officially upgraded to become the first licensed trading platform in Hong Kong to serve retail users.
HashKey Exchange stated on social media that it will soon launch personal authentication services for retail customers, which currently only supports professional customer authentication. Users can now complete pre-registration and KYC basic information verification and receive early HSK reward points.
HashKey stated that it complies with the requirements of local policies and does not accept registrations from users residing in mainland China.
HashKey Exchange is a trading platform under the HashKey Group, with Xiao Feng, the founder of Wanxiang Blockchain Lab, serving as the chairman of HashKey Group.
Currently, the homepage of HashKey Exchange’s official website displays “Hong Kong’s first licensed retail exchange, making it easier to buy coins and safer to store coins.”
At the same time, OSL, another virtual asset exchange, also announced on August 3rd that it has received approval from the Hong Kong Securities and Futures Commission to upgrade its existing licenses and will now provide digital asset trading services for mainstream currencies such as Bitcoin and Ethereum to retail investors.
On August 4th, the stock price of BC Technology Group, the parent company of OSL, rose by 63.25%.
According to OSL’s official website, OSL, under BC Technology Group, is a licensed and regulated digital asset platform by the Hong Kong Securities and Futures Commission.
On June 1st, the “Guideline on Anti-Money Laundering and Counter-Terrorist Financing for Licensed Money Service Operators Engaged in Virtual Asset Trading Business” came into effect. The Hong Kong Securities and Futures Commission announced that it would start accepting applications for VASP (Virtual Asset Service Provider) licenses from institutions that are already operating virtual asset businesses in Hong Kong.
Prior to this, both HashKey and OSL had already obtained License No. 1 (Securities Trading) and License No. 7 (Automated Trading Services). After June 1st, the two institutions submitted their applications at the earliest possible time due to their previous possession of License No. 1 and No. 7. By completing a simplified procedure for license upgrade, they were able to obtain approval to serve retail customers.
Kong Jianping, Director of Cyberport Hong Kong, stated that the announcement of HashKey Exchange and OSL obtaining License No. 1 and No. 7 means that the development of the Hong Kong Web3 financial industry has entered a new stage, allowing more users to enter the Web3 industry through compliant channels and bring more liquidity to the development of the Web3 industry.
Fang Hongjin, Co-Chairman of the Hong Kong Blockchain Association, also stated that this matter is of revolutionary significance. Apart from some small island countries, Hong Kong is the first region in the world to open up to virtual asset exchanges and regulate them through a licensing system.
“The Hong Kong financial regulatory authorities are confident in incorporating virtual asset trading into a regulated and supervised system, allowing ordinary retail investors to participate and having measures and capabilities to protect the security of users’ assets. This is definitely a milestone for further opening up the virtual asset industry in Hong Kong.” said Fang Hongjin.
First-mover advantage in compliance
Compliance is a common characteristic of HashKey and OSL, the two virtual asset exchanges.
BC Tech CFO Hu Zhenbang told Techub News, “OSL was established in 2018, at that time Hong Kong did not yet have mandatory licensing requirements, and we voluntarily accepted licensing based on the principle of compliant and secure operations. In December 2020, OSL obtained the first securities trading license and the seventh automated trading license issued by the Securities and Futures Commission, and started providing digital asset trading services to professional investors.”
According to BC Tech’s 2022 financial report, in the bear market background, OSL’s trading volume increased by 49% year-on-year, exchange business revenue increased by 78.8%, and custody service revenue increased by 5.7% annually.
“Last year, in the absence of regulation in the digital asset market, there were many risky events such as misappropriation of user assets and excessive leverage, which led many investors around the world to accelerate the transfer of digital asset trading and custody to compliant platforms like OSL.” said Hu Zhenbang.
Livio Weng, Chief Operating Officer of HashKey Group, has also publicly stated that asset security has always been the most concerned point for users. HashKey Exchange will establish a complete set of virtual asset risk control assessment and grading systems to ensure that different types of users receive corresponding risk trading services.
Livio Weng pointed out that for user asset security, HashKey Exchange will store user funds in separate accounts, separate from platform operations, with 98% of assets stored in cold wallets to ensure user asset security.
Cold wallets refer to wallets that cannot be accessed by the network and can effectively prevent hackers from stealing.
Kong Jianping said that the common point of HashKey Exchange and OSL is that they are both compliant exchanges in Hong Kong. In the future, compliant platforms that meet Hong Kong regulatory conditions should have opportunities, but the final number of platforms that will be approved will depend on various comprehensive factors.
Fang Hongjin said that HashKey Exchange and OSL may have a significant first-mover advantage. On the one hand, users have stickiness and generally will not easily switch platforms. On the other hand, based on the relevant information that has been learned, platforms that can be approved in the future may have to wait for a relatively long time.
According to the “Guidelines for Virtual Asset Trading Platform Operators” implemented by the Hong Kong Securities and Futures Commission from June 1st, centralized virtual asset exchanges operating in Hong Kong or promoting services to Hong Kong investors must obtain a license from the Hong Kong Securities and Futures Commission and be subject to its supervision. Virtual asset trading platforms that have already obtained the 1st and 7th licenses issued by the Hong Kong Securities and Futures Commission and are operating in Hong Kong have a one-year exemption period and need to supplement their existing licenses.
Fang Hongjin said that currently, mainstream international cryptocurrency exchanges do not meet the above-mentioned conditions. It is more difficult to obtain relevant licenses in Hong Kong, and it requires a longer application time. Moreover, existing international client resources and diversified trading models cannot be brought into Hong Kong’s regulatory system, so they do not have a competitive advantage.
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