Surge in Hong Kong Crypto License Applications from Mainland-Linked Brokers
Two new platforms with mainland China links are preparing to apply for retail trading licenses in Hong Kong, with several others believed to be interested in following suit.
According to a report published by Nikkei Asia earlier this week, the platforms, Yax and PantherTrade, have connections to mainland online securities brokers. PantherTrade is reportedly associated with Futu, a company which in turn is backed by Chinese tech giant Tencent, one of China’s largest technology companies. Yax, an emerging player in the crypto sector, has strong links to UP Fintech Holding, a Beijing-headquartered firm more commonly known as Tiger Brokers.
Capital flight concerns
These connections are significant, given the previous involvement of these brokers in helping mainland Chinese customers invest in offshore assets, primarily US stocks. The firms have previously attracted the attention of China’s financial regulators. A notice from the Chinese securities watchdog in December last year compelled them to cease their “illegal cross-border business” activities.
While crypto trading is banned in mainland China, an investigative report by the Wall Street Journal in August suggested that global exchange Binance was thriving in China despite the ban. Actions taken by the Chinese authorities are demonstrative of some level of concern with regard to crypto trading and potential capital flight through crypto.
VASP licensing
The move by Yax and PantherTrade signals their intention to apply for a virtual asset service platform (VASP) license in Hong Kong, which would enable them to operate cryptocurrency exchanges for retail customers.
Currently, both platforms are undergoing third-party assessments, a mandatory step preceding their formal application to the Securities and Futures Commission (SFC). The timeline for their applications remains uncertain.
Broader interest
The growing interest in VASP licenses is not unique to Yax and PantherTrade. At least four other exchange platforms, similarly linked to mainland China, have also sought the same license, highlighting the eagerness of various players to enter the Hong Kong market. OneDegree, the sole licensed insurer for digital assets in Asia, has observed a significant uptick in license applications, including applications from traditional financial institutions, reflecting a positive trend toward educating the mass market.
The SFC’s recent decision to make license application information public is an attempt to enhance transparency, following a scandal related to Dubai-headquartered crypto exchange JPEX in which over HK$1.5 billion (approximately $190 million) in virtual assets reportedly disappeared from the exchange.
Currently, only two cryptocurrency exchanges, OSL and Hashkey, have received SFC approval. Others, including online brokers, have considered applying for licenses since late last year but are awaiting greater regulatory clarity before taking the plunge.
Hong Kong, under the “one country, two systems” framework, has established itself as a hub for legal retail trading of cryptocurrencies. This development may signify a shift in China’s stance on digital assets and its increasing openness to crypto initiatives, as noted recently by blockchain data provider Chainalysis.
