New rules for persuading withdrawals or selling shells for revenue? OSL reportedly withdraws from the Hong Kong Web3 “gold rush”.

OSL withdraws from Hong Kong Web3 "gold rush" due to new rules for selling shells or persuading withdrawals.

Author: Blocking, Climber

On July 5th, Tencent News “Qian Wang” reported that the Hong Kong compliant virtual asset trading platform OSL has withdrawn from various institutions’ rush to Hong Kong Web3 and is vying for this emerging encrypted market. And this platform has been looking for buyers with acquisition intentions in the market since shortly after the end of the Spring Festival this year, but the next buyer has not been determined.

Contrary to rumors, OSL previously disclosed to the outside world that the platform has developed well this year, not only launching AI trading robots, but also applying for a Hong Kong digital asset retail trading license on June 1. OSL’s parent company BC Technology CFO Hu Zhenbang also stated that it will cooperate with some local brokers in Hong Kong to promote business for retail investors.

As the world’s first compliant virtual asset trading platform to obtain the Hong Kong Securities Regulatory Commission’s Class 1 and 7 licenses, is OSL really no longer committed to deepening the Hong Kong cryptocurrency market trading service business, but selling existing business systems and licenses to obtain market income to replenish the parent company? In addition, how much has the Hong Kong government added to the virtual asset trading platform in the new license and market environment is not friendly enough?

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Below, Blocking will comprehensively sort out the possibilities of this event from the actual situation of various parties.

BC Technology Group

BC Technology Group Limited is an investment holding company mainly engaged in digital asset and blockchain platform businesses. In 2019, it was renamed “BC Technology” from “Brand China”, a Hong Kong-listed company. Since then, benefiting from the blockchain concept and its digital asset trading platform OSL being approved, BC Technology’s market value has continued to rise.

However, due to the cryptocurrency winter of 2022, its latest financial report shows that the revenue of BC Technology Group in 2022 was 116 million, a year-on-year decrease of 64.28%; the net loss expanded to 550 million Hong Kong dollars. However, in early February of this year, BC Technology Group issued a profit warning, stating a net loss of approximately HK$369 million in 2021.

In addition, BC Technology Group’s stock price has fallen all the way from its high point since February 2021. Especially after OSL announced the upgrade of the retail transaction license, BC’s stock price came to a historical low of around 1.55 Hong Kong dollars.

BC Technology Group’s continuous loss of performance has led to its third-largest shareholder choosing to sell, with GIC Private Limited reducing its holdings by 197,500 shares of BC Technology Group at a price of HKD 1.7519 per share on June 19th.

With regard to the company’s losses, BC Group believes that the increase in net losses is mainly attributable to losses incurred as a result of maintaining digital assets to facilitate transactions in its normal digital asset trading business, as well as increased expenses related to the construction of a compliant institutional-level digital asset business unit and its technological, legal, and compliance and insurance infrastructure.

Based on this, BC Group has completed two company-wide reorganizations in the second half of 2022 and the first half of 2023 to improve business efficiency. However, the company still expects operating costs to further decline in the future period.

The continued poor revenue situation has deepened the idea of BC Group selling its OSL trading platform, and because BC Group’s executive director, Andy Cheung, was once known as the “Hong Kong shell king” and has extensive experience in “speculating on shells,” selling OSL again is also a routine operation for him.

OSL Trading Platform

On December 15, 2020, OSL, a digital asset trading platform owned by BC Technology Group, obtained a Type 1 and Type 7 license under the regulatory framework of the Hong Kong Securities and Futures Commission, becoming the first digital asset trading platform of a publicly listed parent company in Hong Kong to obtain a license, have assets covered by insurance, and be audited by one of the Big Four accounting firms.

After the Hong Kong virtual asset new regulations were officially implemented on June 1, 2022, OSL became one of the first encrypted platforms to apply for virtual asset retail trading business. For a long time, OSL was the only licensed and listed digital asset trading platform in Hong Kong.

Thanks to its compliance advantage, the platform has conducted business cooperation in the digital asset field with traditional financial giants such as DBS Bank and Standard Chartered Bank, and has received investment of HKD 543 million from Singapore’s sovereign wealth fund GIC.

However, like its parent company’s revenue situation, OSL’s cryptocurrency income in 2022 was only HKD 71.48 million, less than one-third of the approximately HKD 270 million in the previous year.

Therefore, fixed cost spending has been listed, and given the strict regulatory regulations and poor market environment, it is not necessary to hold onto this hot potato in the long-term loss-making situation of the company. It is better to sell it off early.

However, as the COO mentioned, the move to open up the Web3 retail end in Hong Kong demonstrates an attitude of embracing the entire Web3 industry, so it is not important how many institutions apply for or obtain licenses in the end, but rather the recognition of everyone’s attitude towards Hong Kong.

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