Check whether virtual asset trading platforms may be closing down business in Hong Kong

We have discussed before the potential high risks associated with unlicensed Virtual Asset Trading Platforms (VATPs) (Learn more), and that investors interested in virtual assets should choose licensed platforms to protect their interest. Also, investors should note that some VATPs may exit the Hong Kong market in the coming few months.

The VATP licensing regime came into effect on 1 June 2023 with a one-year transitional period. VATPs that had operated in Hong Kong before the implementation of the licensing regime (hereafter "existing VATPs") can continue their operations until 31 May 2024.  For those intending to continue with their Hong Kong operations, they must apply for a licence from the Securities and Futures Commission (SFC) on or before 29 February 2024. Currently, two VATPs have obtained licence from the SFC and they can offer Bitcoin and Ethereum trading service to retail investors. Meanwhile, there are several other VATPs who have submitted licence applications.

If an existing VATP does not apply for a licence before the deadline, it must close down its Hong Kong business in an orderly manner by 31 May 2024. By then, such an VATP cannot provide virtual asset trading services to Hong Kong investors. Investors should pay attention to the VATPs’ announcements or contact them to understand the arrangement and timeline of Hong Kong business closure. In addition, if the VATP’s licence application is not approved by the SFC, the VATP will have to close its Hong Kong operation within 3 months.

Investors can refer to the SFC’s "List of virtual asset trading platforms” for:

1. VATPs who have already obtained a SFC licence;
2. VATPs who have submitted a licence application;
3. VATPs whose licence applications have been returned, refused or withdrawn;
4. VATPs required by law to close down Hong Kong business within a specified period.

Though existing VATPs can continue their Hong Kong business until 31 May 2024 under the transition arrangement of the VATP licensing regime, these platforms (including those whose have submitted licence applications) are still not licensed and may be associated with potential high risks. Even VATPs that have submitted licence applications do not warrant approvals by the SFC. If the licence applications are being returned, refused or withdrawn, such VATPs are required to close down their Hong Kong business in an orderly manner within 3 months. Investors using unlicensed platforms should be prepared to take appropriate actions, e.g. close their accounts with unlicensed VATPs or transfer to SFC-licensed VATPs for trading virtual assets.

The above-mentioned transitional arrangement only applies to VATPs that had operated in Hong Kong before 1 June 2023. If a VATP has not operated in Hong Kong previously, it must obtain a licence from the SFC before conducting business in Hong Kong. It should be reiterated that unlicensed platforms may be associated with high potential risks. Investors should always choose platforms or entities licensed by the SFC to protect their rights and interests.