Hong Kong's SFC will require all crypto exchanges to be regulated

Hong Kong's Securities and Futures Commission (SFC) will require all cryptocurrency exchanges operating in the city to be regulated.

Ashley Alder, chief executive officer of the Hong Kong securities watchdog, said in the Fintech Week event on Tuesday that the requirement will apply to all platforms even if they do not trade security tokens, according to a Reuters report.

The move appears to be widening the SFC's approach last year, which was allowing crypto exchanges to voluntarily join a regulatory framework if they operate in Hong Kong and "offer trading of at least one security token," according to the SFC's announcement in 2019.

However, Alder said some exchanges managed to operate outside the SFC's regulatory radar under that approach. 


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The SFC will propose a new licensing scheme under the anti-money laundering ordinance for all crypto trading platforms in Hong Kong or target investors in the city, Alder said. 

"Once this new regime is in place, all virtual asset trading platforms in Hong Kong would be regulated, supervised and monitored under one of two regimes: the existing opt-in framework we introduced last year, or the proposed new licensing approach being announced today," he said in the speech. "Failure to do so would, of course, be an offense."

"As a result, no doubt some firms may choose to relocate to avoid regulations," Hugh Madden, CEO of BC Group that operates OSL in Hong Kong, commented on the SFC move. "This game of regulatory arbitrage has a limited runway however, as the Financial Action Task Force’s June 2019 recommendations made it clear all 39 FATF member jurisdictions will follow Hong Kong’s path.

Currently, several major global crypto exchanges such as Huobi, OKEx, FTX and BitMex have operations based in Hong Kong. BitMex and its co-founders are facing criminal charges filed by the U.S. Department of Justice. 

About Author

Wolfie joined The Block’s news team in 2020 and switched to the research side in 2021 to focus on crypto mining analysis. Prior to The Block, he had been a journalist at CoinDesk for three years. Wolfie has a background in financial journalism.