Hong Kong Securities and Futures Commission discloses regulatory list, which crypto company has the highest risk?

Hong Kong Securities and Futures Commission reveals regulatory list to identify the crypto company with the highest risk.

Burst the bubble, there are many unlicensed and unregistered ones.

Author | Qin Xiaofeng

As the scale of the JPEX case involving the crypto platform expands, the Hong Kong Securities and Futures Commission (SFC) has started disclosing more information about virtual asset trading platforms (VATPs) in order to enhance public awareness of fraud and improve information transparency.

On September 29th, the SFC released several lists of virtual asset trading platforms on its website (click to jump): licensed virtual asset trading platform list, virtual asset trading platform applicant list, closed virtual asset trading platform list, virtual asset trading platform list treated as licensed, and a special list for suspicious virtual asset trading platforms. Odaily has also analyzed the more detailed information behind these lists for its readers.

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First, there is the “licensed virtual asset trading platform list,” which currently has only two platforms: OSL Digital Securities Limited (platform: OSL Exchange) and Hash Blockchain Limited (platform: HashKey Exchange).

It is worth noting that the current licensing system for virtual asset trading platform operators in Hong Kong is a “dual licensing” system. In addition to the licensing system under the Securities and Futures Ordinance (SFO) for “securities tokens,” there is another licensing system under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) for “non-securities tokens.” OSL Exchange and HashKey Exchange have both obtained the former license, with approvals granted on December 15, 2020, and November 9, 2022, respectively. There is no record of the second license yet.

However, this does not prevent them from providing cryptocurrency trading services to the market. For example, in August of this year, OSL was approved by the SFC to upgrade its existing license, allowing it to officially provide trading services for mainstream coins such as Bitcoin and Ethereum to retail investors. HashKey Exchange also offers BTC/HKD and ETH/HKD trading pairs to retail investors, but other altcoins (such as Avalanche) are only available to professional investors.

Second, there is the “virtual asset trading platform applicant list,” which currently has four companies: Hong Kong BGE Limited (platform: BGX), Hong Kong Digital Asset EX Limited (platform: HKbitEX), Hong Kong Virtual Asset Exchange Limited (platform: HKVAX), and Victory Fintech ComLianGuainy Limited (platform: VDX).

The SFC stated that entities on the applicant list have not been licensed by the SFC and may not necessarily comply with the SFC’s requirements. Applications that fail to meet the standards will be returned by the SFC, and the names of the applicants will be removed from the virtual asset trading platform applicant list and added to the list of removed applicants. The main purpose of publishing this list is to facilitate the public in determining whether virtual asset trading platforms have made false statements about their license applications (such as claiming to have submitted a license application when they have not).

According to Hong Kong media, dozens of cryptocurrency platforms or listed companies and securities companies have claimed to be applying for, planning to apply for, or have already applied for Hong Kong cryptocurrency licenses. These include: Binance, OKX, ByBit, HTX Exchange, BingX, Bitget, Gate.io, Gate.hk, National Innovation (00290), NewCert Technology (01063), U.S. Lion Group Holdings LGHL, Greenland Holdings Group’s subsidiary Greenland Jinchuang, and Bullish under Block.one.

Currently, there are four companies applying for licenses with the following backgrounds:

(1) HKBGE. HKBGE is a wholly-owned subsidiary of HKE Holdings (01726), a Hong Kong-listed company. It submitted applications for License No. 1 and License No. 7 last year. The former CEO of HKBGE, Thor Chan, was the CEO of the now-collapsed exchange AAX. In December of last year, HKE Holdings announced that Thor Chan had resigned from the board of directors and CEO position of HKBGE, and the group member companies (including HKBGE) have no business relationship with AAX. Subsequently, HKBGE appointed Ouyang Jiannan as CEO, who was the former Chief Operations Officer of HashKey Exchange. Currently, HKBGE is only open to invited professional investors.

(2) HKbitEX. HKbitEX is affiliated with Taiji Capital Group and has always positioned itself as one of the first applicants for the VATP institution. Its founder, Renguo Gao, used to work at Hong Kong Exchanges and Clearing (00388), where he was involved in the Stock Connect and Bond Connect programs. After founding HKbitEX, Renguo Gao recruited several former colleagues from Hong Kong Exchanges and Clearing, and the Chief Development Officer, Lin Shi, was previously the Co-Head of the Listing Division at Hong Kong Exchanges and Clearing.

In September of this year, Taiji Capital Group announced the launch of Hong Kong’s first real estate fund security token offering (STO), and the closed-end fund PRINCE, issued by its subsidiary Pioneer Asset Management, aims to raise approximately HKD 100 million, targeting professional investors. If regulatory approval is obtained, the group plans to list the tokens on its virtual asset trading platform HKbitEX in the future.

(3) HKVAX. HKVAX previously announced in August that it had received a principle approval notice from the Securities and Futures Commission, allowing it to engage in Type 1 and Type 7 regulated activities, making it the third licensed virtual asset trading platform in Hong Kong. Huo Zhaoliang, co-founder and COO of HKVAX, stated that it would take at least six months to obtain the Type 1 and Type 7 licenses from the Securities and Futures Commission, and plans to launch the platform, OTC over-the-counter trading, and other services. However, whether to launch STOs (security tokens) will depend on the regulatory requirements of the Securities and Futures Commission (Note: These claims are made by the platform itself and have not been confirmed by the Securities and Futures Commission of Hong Kong; a search on the official website of the Securities and Futures Commission by Odaily Star Daily did not find any so-called principle approval notice from the platform).

The HKVAX website shows that the company has three co-founders. CEO Wu Weiliang previously served as the Executive Director of the International Division of CITIC Futures and is currently the Vice Chairman of the Financial and Treasury Services Committee of the Hong Kong General Chamber of Commerce (HKGCC).

(4) VDX. VDX is a cryptocurrency platform owned by the Hong Kong-listed company Success Securities (08145). The company’s board of directors includes Gao Juan, the chairman of the Hong Kong Securities Association. In September of this year, Success Securities announced that its virtual asset trading app was available on the Apple Store and Android systems. It is worth noting that its virtual asset trading services are only available to professional investors.

Chen Peiquan, the executive director of Success Securities, stated that it is expected that the Hong Kong Securities and Futures Commission will soon announce guidelines on opening up retail investors’ trading of virtual assets. According to the expected progress, Success Securities may open up retail investors’ virtual asset trading in the fourth quarter of 2023.

Gao Juan, the CEO of Success Securities, stated that the company is only connecting with the licensed virtual asset trading platform OSL. Investors can buy and sell cryptocurrencies from that exchange through the company, and OSL only provides BTC and ETH. The cryptocurrencies purchased by investors will be held in custody by OSL and are protected by insurance. The company is also prepared to connect to other licensed exchanges.

In the list published by the Securities and Futures Commission, there are also three blank items: the “list of applicants whose license applications have been rejected, refused, or withdrawn”; the “list of virtual asset trading platforms that must cease operations within a specified period according to relevant legislation”; and the “list of virtual asset trading platform operators who have been considered licensed as of June 1, 2024”.

Finally, the Securities and Futures Commission of Hong Kong also published a list of “suspicious virtual asset trading platforms”, which involves six platforms. The names and details are as follows:

• JPEX: Falsely claimed to have obtained licenses from several overseas regulatory agencies to operate virtual asset trading platforms, provided false high returns for some products, and imposed restrictions on users’ asset withdrawals. Website: https://jp-ex.io/

• FUBT Exchange: Has the same name as the collapsed and absconded FUBT Exchange, claiming to be a cryptocurrency trading platform and providing a fake Hong Kong telephone number. It is said to have business premises in Hong Kong. Website: www.fubthk.com

• Futu: Using the same company logo to impersonate the licensed institution Futu Securities International (Hong Kong) Limited of the Securities and Futures Commission. Websites: https://futu-pro.com; https://futubit.com

• EFSPD: Falsely claimed to have obtained approval from Hong Kong Exchanges and Clearing Limited to launch a cryptocurrency token and claimed to be regulated by the Hong Kong Monetary Authority. Website: www.efspd.com

• OSL Trading: Impersonating the licensed institution OSL. Website: www.hifly 59702.top

• arrano: Falsely claimed to be a one-stop platform for NFT and cryptocurrency products. Website: https://arrano.network

The Securities Regulatory Commission stated that it will regularly update the above-mentioned list. Investors should avoid buying or selling virtual assets on unregulated virtual asset trading platforms (including any applicants listed on the virtual asset trading platform applicant list) to prevent financial risks. Otherwise, it may be difficult to obtain compensation through legal channels.

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