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Hong Kong's efforts to become a global cryptocurrency hub is facing a potential roadblock as the Securities and Futures Commission (SFC) has discovered "unsatisfactory practices" at some crypto exchanges seeking full licenses.
Following on-site inspections, the SFC has identified concerns around client asset custody and cybersecurity practices at an unspecified number of applicants, Bloomberg reported on Monday.
Sources familiar with the situation revealed that some exchanges rely too heavily on a small group of executives to manage client funds, while others lack adequate safeguards against cyber threats.
The SFC, while confirming ongoing inspections, declined to comment on specific cases. However, the regulator emphasized its stance on addressing critical deficiencies. Platforms failing to rectify these issues risk losing their temporary "deemed-to-be-licensed" status or facing application rejection.
With 11 entities currently vying for a full license, including Crypto.com, HKbitEX, PantherTrade, and Bullish, the wait for their responses regarding these findings continues.
This news comes after the SFC announced on-site inspections in late May, prompting 12 other applicants, like OKX and Bybit, to withdraw their applications. Currently, only OSL and HashKey hold full licenses in Hong Kong.
Hong Kong's crypto ambitions, further fueled by the recent approval of spot-crypto products, might be hindered by the SFC's strict approach.
Blockhead
