In just two days, OKX will be exiting the Hong Kong market. OKX’s decision to do so seems completely normal to me. Without a Hong Kong license, they can only clear out Hong Kong users. With a Hong Kong license, they might even have to clear out mainland users as well.
Several exchanges have also withdrawn their applications to operate in Hong Kong, including Gate and Huobi. According to the regulations of the Hong Kong Securities and Futures Commission (SFC), virtual asset trading platforms operating in Hong Kong must submit a license application to the SFC by February 29, 2024, or they must cease their operations in Hong Kong by May 31, 2024. This means that, apart from Bybit, all the top ten global exchanges in terms of trading volume will have to bid farewell to Hong Kong.
It is important to note that all emerging projects in the cryptocurrency industry, especially those tokens selected by professional institutions, are issued on these exchanges. We cannot rely solely on the approved coins by the SFC for the entire cryptocurrency industry, can we?
If Hong Kong strictly enforces its cryptocurrency policies, it may become the most unwelcoming place for cryptocurrencies in the world, second only to mainland China.
Licensed exchanges face challenges in achieving success. Currently, only two exchanges, Hashkey and OSL, have obtained the VASP license from the SFC. Hashkey can be considered the flagship of these compliant institutions. It operates under a dual flagship model, with Hashkey Exchange handling local Hong Kong business and Hashkey Global handling global business.
Let’s take a look at Hashkey Exchange. Yesterday, its trading volume was only slightly over $13 million, and it listed only 20 cryptocurrencies. Considering the efforts and compliance Hashkey has gone through, it is unfortunate that only 20 coins are available for trading.
Historically, its trading volume has always been bleak, with some temporary spikes due to wash trading. To put things into perspective, Coinbase, a compliant exchange in the United States, had a trading volume of $2.6 billion yesterday, which is 2,000 times that of Hashkey Exchange.
Hashkey Global, on the other hand, presents slightly better data. Although it only added three more coins, its trading volume reached over $160 million, more than ten times that of Hashkey Exchange.
OSL, another licensed institution, obtained its virtual asset trading license earlier and subsequently attached itself to the traditional top-tier exchange, Bitget. OSL announced on November 14, 2023, that it received a strategic investment of approximately HKD 710 million from the BGX Group, with BGX holding a 29.97% stake, making it the largest shareholder of OSL (formerly known as BC Technology Group). Bitget ultimately complied with the regulations and entered the Hong Kong virtual asset market in its own way.
So far, OSL’s trading data remains inaccessible. It is quite unique for a licensed exchange to not disclose its trading data, but this seems to be a characteristic of Hong Kong.
Currently, there are 18 institutions still in line for licensing, but even if they obtain the license, it may be difficult for them. Among the applicants, only Bybit has some trading volume, while the others are relatively far from the center of the cryptocurrency industry.
Unlike the United States, no other country has the ability to exercise extraterritorial jurisdiction. Even in mainland China, where cryptocurrency is strictly banned, it is still easy for Chinese individuals to download an overseas exchange and register for trading.
On one hand, as a more internationalized place, it is difficult for Hong Kong to demand that all exchanges comply with its government’s requirements. Once you leave Hong Kong, there is no jurisdiction.
On the other hand, the most cutting-edge projects and preferred platforms for token issuance are still those familiar exchanges like Binance and OKX.
For those who remain in Hong Kong, whether they are cryptocurrency investors or project owners, what should they do? Can they only rely on compliant exchanges? Can they only trade on compliant platforms?
All of these factors will only push the cryptocurrency industry further away from Hong Kong.