Hong Kong crypto exchange folds to regulatory pressure

Update May 24, 12:50 pm UTC: This article has been updated to include the news about the withdrawal of the OKX exchange from Hong Kong.

Hong Kong-based cryptocurrency exchange Gate.HK has closed down after failing to meet the local licensing requirements that will be enforced starting June 1.

The Hong Kong Securities and Futures Commission (SFC) mandated that all crypto exchanges in the region acquire an operational license. Exchanges that failed to apply for a license must stop their services by May 31.

Following this requirement, Gate.HK submitted its license application to the SFC on Feb. 28. However, the exchange withdrew the application on May 22, citing the need for a “major overhaul” of its trading platform.

List of applicants whose license applications have been returned, refused or withdrawn. Source: SFC

As of May 23, Gate.HK has ceased all activities related to acquiring new users and marketing. Existing users can no longer make deposits and are restricted to withdrawing funds only until Aug. 28.

Gate.HK will pull the final plug on its trading platform on May 28, when all tokens will be permanently delisted. The list of tokens included Bitcoin (BTC), Ether (ETH), Solana (SOL), Polygon (MATIC) and Tether (USDT), among others.

The crypto exchange intends to relaunch its services only after reconstructing its platform to comply with Hong Kong’s regulatory requirements. These requirements include establishing Anti-Money Laundering and Counter-Terrorist Financing measures. The company said:

“Gate.HK is actively working on the aforementioned overhaul. We plan to resume our business in Hong Kong in the future and contribute to the virtual asset ecosystem after obtaining the relevant licenses.”

The news came just a day before another major global exchange, OKX, announced its departure from Hong Kong on May 24. The OKX exchange will cease to provide centralized virtual asset trading services to Hong Kong residents by May 31, 2024, the announcement notes, adding:

“Customer funds remain safe, and withdrawal services will not be affected. After May 31, 2024, customers can only withdraw.”

Before Gate.HK’s exit, three other exchanges — Huobi HK, QuanXLab and IBTCEX — also withdrew their license applications in May.

Related: Hong Kong Bitcoin, Ether ETFs wipe 2 weeks of inflow in a single day

A recent Bloomberg report indicated that the SFC is considering allowing spot Ether exchange-traded fund (ETF) issuers to include an ETH staking option, enabling them to generate passive income.

The SFC reportedly discussed providing staking services via licensed platforms with the country’s crypto ETF issuers after fielding proposals in recent weeks.

The financial regulator is currently discussing the matter, and there is no set timeline for implementation.

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