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Crypto Exchanges Sit on the Fence after Hong Kong Set New Rule for Crypto Exchanges

On October 6, Hong Kong’s Securities and Futures Commission (SFC) released a set of guidelines to pave the way for the issuance of operating licenses to cryptocurrency exchanges based in the city.

Most of Chinese crypto exchanges sit on the fence apart from OKEx.

Under the new framework, announced at Hong Kong Fintech Week, platform operators that offer trading in virtual assets classified as securities may seek Type 1 and Type 7 licenses from the SFC.

Only security token falls under the regulator’s purview, while KYC, AML and platform security will be strictly reviewed; Only qualified investors can participate in the user end, which means that most of the existing investors in Chinese crypto space will be blocked.

Licenses must only provide services to “professional investors” and they must provide monthly reports to the SFC on its business activities in a format prescribed by the SFC.

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After the issuance of the rule, Ren Yunan, CEO of OKLink said OKLink can be inquired through Hong Kong traditional securities companies. Next, OK group’s technical strength in blockchain technology and digital asset trading will be applied in  upcoming compliance business in HongKong. Jay, CEO of OKEx, also said on Weibo (Twitter-like media in China) that

“OKEx has already implemented the same system and market monitoring standards as the rules released by SFC, including KYC, AML, separation of customer funds, risk control. OKEx has been prepared to accept supervision at any time.”

As Huobi Group founder Leon Li was been appointed CEO, chairman of the board and executive director of the board of Pantronics Holdings Ltd, an HK listed company. It is speculated that Huobi may be the first licensed crypto exchange in Hong Kong. But Huobi has not as yet commented.

At present, more than 10 crypto exchanges were running in Hong Kong. As the new regulation released by SFC will compress the grey space of the crypto exchanges, so it will have an impact on its cryptocurrency business if the exchange accepts the supervision. Therefore, for some exchanges, supervision is not a good thing.

For licensed exchanges, only qualified investors with an investment portfolio of not less than 8 million Chinese yuan (or equivalent foreign currency), or not less than 40 million Chinese yuan assets(or equivalent foreign currency) can participate under the new regulation. Ordinary investors must entrust their own funds to compliant institutions if they want to use the licensed exchanges.

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