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According to the SFC’s conclusions on the proposed regulatory requirements for VATP operators, pre-existing operators that qualify benefitted from a “non-contravention” period, during which they could remain unlicensed as VATPs. Now that the period has ended, these firms are deemed-to-be-licensed from 1 June 2024, provided certain requirements are met.
Since the end of the non-contravention period, which ran between 1 June 2023 and 31 May 2024, seven major firms out of 24 applicants have withdrawn their licence applications for a virtual asset trading platform (VATP) licence. This was mainly due to the stringent regulatory requirements of the SFC and the firms’ inability to serve Mainland Chinese customers. As of now, there are only two licensed VATPs in Hong Kong. Investors are urged to trade virtual assets only on SFC-licensed VATPs, which can be identified by checking the “list of licensed VATPs” on the regulator’s official website.
The remaining 17 VATP applicants, listed as “deemed-to-be-licensed”, and their ultimate owners must fully comply with the SFC regulatory requirements and licensing conditions, including preventing Mainland Chinese residents from accessing their services. They cannot actively market their services or onboard new retail clients before formally licensed.
The SFC also expects the VATP applicants to have sufficient resources, expertise and independent assurance in place to meet the set requirements. The Hong Kong regulator mentioned that it will conduct on-site inspections on the ‘deemed-to-be-licensed’ VATP applicants to ensure they comply with the regulatory requirements, focusing on the safeguarding of client assets and know-your-client processes.
VATP applicants in scope are advised to conduct an independent health check or mock inspection on their current systems and controls to prepare for the SFC’s on-site inspections. Any non-compliance will be penalised by the regulator and result in the licence application being refused. Those that haven’t submitted their license applications, or have been rejected by the SFC, need to cease business operations in Hong Kong by the end of May 2024 to avoid enforcement action.
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