The Securities and Futures Commission (SFC) of Hong Kong has announced its plan to grant additional licenses to cryptocurrency exchanges and digital asset firms operating in the region before the end of 2025. This move marks a significant step in the city’s broader ambition to position itself as a global hub for fintech and digital assets, while ensuring investor protection and regulatory compliance.
Advancing the Virtual Asset Regulatory Framework
Hong Kong’s SFC Chief Executive Officer, Julia Leung, confirmed that the commission expects to make substantial progress in licensing the 11 virtual asset trading platforms (VATPs) currently on the provisional license list. These platforms have been operating under a “deemed licensed” status, allowing them to function while their full applications are under review.
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The SFC has completed its first round of on-site inspections for these applicants. According to Leung, all platforms adhering to the SFC's licensing framework are expected to receive formal approval in due course. However, investors are still advised to exercise caution when engaging with any platform not yet fully licensed.
Currently, 16 companies are awaiting final decisions on their VATP applications. The phased issuance of licenses is designed to ensure that each exchange meets strict compliance standards—particularly in areas such as anti-money laundering (AML), cybersecurity, and custody of client assets.
Strengthening Compliance Among Crypto Exchanges
One of the key motivations behind the staggered licensing approach is to improve compliance across the growing number of crypto trading platforms. The SFC aims to prevent a repeat of past incidents, such as the high-profile collapse of JPEX, a Dubai-based exchange that allegedly defrauded over 2,500 Hong Kong investors of approximately $1.65 billion through manipulated withdrawal fees and restricted fund access.
This scandal served as a wake-up call for regulators and highlighted the urgent need for tighter oversight. In response, the SFC has intensified its scrutiny of both local and international exchanges seeking to operate in Hong Kong.
Roadmap for 2025–2027: Expanding Blockchain Innovation
The upcoming license approvals align with the SFC’s newly released strategic roadmap for 2025–2027. This framework outlines three core priorities:
- Advancing comprehensive regulation of virtual assets
- Promoting tokenization of real-world assets (RWA)
- Deepening exploration of blockchain technology in financial infrastructure
Under this vision, the SFC will collaborate with the Customs and Excise Department (C&ED) to regulate companies offering over-the-counter (OTC) crypto trading services—a segment that has seen increased activity but limited oversight.
Tokenizing real-world assets, such as real estate or private equity, is expected to unlock new investment opportunities and enhance market liquidity. By integrating blockchain into traditional finance, Hong Kong aims to bridge innovation with regulatory rigor.
Current Market Access Restrictions
Despite its progressive regulatory stance, Hong Kong maintains strict rules for retail investors. As of now, only four specific cryptocurrencies—Bitcoin (BTC), Ethereum (ETH), and their related futures—are approved for retail trading on licensed platforms. This limitation reflects the SFC’s cautious approach, balancing innovation with investor protection.
Critics argue that these restrictions may hinder Hong Kong’s competitiveness against more open markets like Singapore or Switzerland. However, regulators emphasize that a measured rollout ensures long-term stability and trust in the digital asset ecosystem.
Licensed Players in Hong Kong’s Crypto Landscape
To date, only three crypto exchanges have received full operating licenses from the SFC:
- OSL Exchange – Licensed in 2020
- HashKey – Licensed in 2023
- HKVAX – Recently approved as the third licensed platform
These platforms serve as benchmarks for compliance and operational transparency. Their success demonstrates that rigorous regulation can coexist with innovation.
Meanwhile, several prominent global and regional exchanges—including Crypto.com, Bullish, HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin, and Matrixport HK—remain in the application pipeline without full approval.
Addressing Non-Compliance and Building Trust
During recent audits, the SFC identified compliance shortcomings among several applicants seeking full licensure. Issues ranged from inadequate risk management systems to insufficient safeguards for user funds. These findings underscore the importance of robust internal controls and third-party audits in maintaining market integrity.
By enforcing high standards, the SFC aims to rebuild public confidence after the JPEX incident and establish Hong Kong as a trustworthy gateway for institutional and retail participation in digital finance.
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Frequently Asked Questions (FAQ)
Q: How many crypto exchanges are currently licensed in Hong Kong?
A: As of 2025, there are three fully licensed virtual asset trading platforms: OSL, HashKey, and HKVAX.
Q: Can retail investors trade any cryptocurrency in Hong Kong?
A: No. Retail investors are only permitted to trade Bitcoin and Ethereum—and their futures—on SFC-approved platforms.
Q: What is the “deemed licensed” status?
A: It allows certain platforms to operate temporarily while their full license applications are being processed, provided they meet interim regulatory requirements.
Q: Why is Hong Kong taking a cautious approach to crypto regulation?
A: To protect investors and maintain financial stability, especially after high-profile fraud cases like JPEX. The phased licensing model ensures only compliant platforms gain full approval.
Q: What role does blockchain play in Hong Kong’s financial future?
A: The SFC is actively exploring blockchain for applications such as asset tokenization, cross-border payments, and secure digital identity verification.
Q: Are foreign crypto exchanges allowed to operate in Hong Kong?
A: Yes, but they must apply for a VATP license and comply with all local regulations, including capital requirements and investor protection measures.
Hong Kong’s methodical expansion of crypto licensing reflects a broader trend: the convergence of innovation and regulation. While some may view the pace as slow, it underscores a commitment to sustainable growth over short-term gains.
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As more platforms clear the licensing bar, Hong Kong is poised to become a model for responsible digital asset adoption—one compliant exchange at a time.