Crypto Exchange BitMart Withdraws Application for Virtual Asset License in Stringent Regulatory Hong Kong Environment

BitMart Withdraws Application For Hong Kong Virtual Asset Service Provider License

BitMart, a renowned cryptocurrency exchange, recently retracted its application to receive a virtual asset service provider license in Hong Kong. This has been recorded in the official roster of virtual asset trading platforms overseen by the Securities and Futures Commission (SFC), the Hong Kong regulator.

A Trend Among Crypto Trading Platforms

The move by BitMart is not an isolated incident. In fact, it marked the latest in an emerging trend among cryptocurrency trading platforms that have been backing out of their applications. For instance, other major crypto exchange platforms such as Bybit withdrew its application at the end of May 2024. The same movement was seen from OKX also at the end of the same month. In addition, other platforms like Gate have made similar approaches.

The Impact of Tighter Regulatory Frameworks

This mass withdrawal of applications was a response to the impending deadline set by the local regulator to expel unlicensed platforms. This move is a direct consequence of the strict requirements that were put in place for local cryptocurrency exchanges.

Regulatory Requirements by the SFC

The Securities and Futures Commission requires any centrally operated cryptocurrency platform that operates within its jurisdiction or markets to local investors to obtain a license. This protocol keeps platforms accountable and ensures they keep liquid assets equivalent to at least 12 months of operational expenses. Moreover, they should also maintain at least 5 million Hong Kong dollars ($641,490) worth of paid-up share capital.

Protective Measures for Client Assets

In line with this, approximately 98% of customer assets must remain in cold storage (offline), and transfers are only allowed to previously-approved (whitelisted) addresses. The local regulator requires platforms to conform to strict key management protocols, necessitating 100% insurance coverage of hot storage (online) and 50% of cold storage holdings. Furthermore, the new regulations that have been accepted for crypto custody services earlier this month are stricter and prohibit relying on smart contracts for the management of cold wallets.

The Crypto Exchanges Licensed by Hong Kong

Despite the stringent regulations and requirements, Hong Kong has to date granted operational licenses to four cryptocurrency exchanges including PantherTrade, YAX, Bullish, and BGE. At present, a total of eleven crypto exchanges are running as licensed crypto exchanges within the Hong Kong jurisdiction.

The Role of Crypto Regulatory Frameworks in Hong Kong’s Financial Space

Hong Kong is in the process of developing its comprehensive crypto regulatory framework to support the growth of the crypto industry. This is part and parcel of leveraging its position as a financial hub. There have already been some positive results from this approach; a subsidiary of China Merchants Bank (CMB), one of China’s main banks, has recently launched its own crypto exchange in Hong Kong.

Ongoing Efforts for Stablecoin Regulations

Hong Kong regulators are also aiming to establish a strong regulatory base for stablecoins. Earlier this month, the Hong Kong Monetary Authority finalized its regulatory framework for stablecoin issuers. This framework is also strong enough to negatively impact some local companies causing them to post double-digit losses. However, analysts described this sell-off as a healthy correction since the requirements for stablecoin issuers were more stringent than expected. Hong Kong’s rigorous crypto regulatory foundation thus aims to ensure that the crypto industry’s exciting potential does not compromise investors’ safety or the stability of the financial system. It exemplifies the delicate balancing act that regulators worldwide are attempting as cryptocurrency becomes an increasingly significant factor in global finance and commerce.