The first license under Hong Kong’s new crypto regime went to HashKey Exchange, legalizing the retail trading of tokens in the city as officials seek to foster a global hub for the digital-asset sector.
HashKey will be able to “expand its business scope from serving professional investors to retail users” after receiving an upgrade of its existing licenses, the company said in a Thursday statement. The Securities and Futures Commission has yet to confirm the announcement.
Hong Kong started a mandatory crypto framework in June, part of an effort to restore its image as a cutting-edge financial center. The pivot stirred substantial interest and contrasts with a US digital-asset clampdown, but the city has yet to win big investments from an industry chastened by a market rout last year.
HashKey said it has partnered with Standard Chartered Plc to provide fiat currency deposit and withdrawal services. The company also announced the launch of its virtual asset over-the-counter trading service.
HashKey and rival OSL were the only two crypto exchanges with permits under Hong Kong’s earlier voluntary licensing program.
HashKey Group operates in areas from venture funding to asset management and trading. The firm was in early-stage talks to raise $100 million to $200 million at a valuation above $1 billion, Bloomberg News reported in May.
Under Hong Kong’s new rules, crypto exchanges can offer trading to individuals and institutions if they secure and comply with licenses intended to curb the risky practices exposed by the 2022 crash and the collapse of the FTX platform.
Retail investors are restricted to larger coins like Bitcoin and Ether that feature in at least two recognized, investable indexes. Requirements for risk assessments, insurance cover and asset custody could add to operating costs for the exchanges.
Cautious Reception
Crypto businesses are proceeding cautiously with new investments after a $1.8 trillion slump in token prices from a 2021 peak and thousands of job losses.
In a Bloomberg News survey in May, 15 major digital-asset outfits — including key exchanges that accounted for the vast bulk of crypto trading volumes — refrained from elaborating on specific investment plans for Hong Kong.
At the same time, the SFC has received dozens of inquiries and crypto firms such as Huobi, OKX and Amber Group have said they plan to apply for licenses. Hong Kong offers not just a local market but also a conduit to Chinese wealth, particularly if Beijing ever loosens a ban on crypto trading on the mainland.
The digital-asset industry is increasingly turning to Asia for growth opportunities as the region clarifies regulations. Hong Kong, Japan, Singapore and South Korea are among the jurisdictions seeking to woo crypto businesses.
They face competition from the likes of Dubai and the European Union. The US, meanwhile, is mired in a crypto fog caused by contradictory court judgments, a turf war between regulatory agencies and disputes about proposed legislation.
(Updates with details from statement)
Author: Sarah Zheng, Suvashree Ghosh and Kiuyan Wong
