jakiro
Author: Wu Wenqian, Mr. Mulana Investment Management
June 1 is an important day set by the Hong Kong Certificate Commission.
Exchanges operating in Hong Kong before June 1 last year can enjoy the treatment of transitional arrangements, that is, they can operate until May 31 this year without obtaining a license.After June 1 today, all exchanges must obtain a license or license from the China Securities Regulatory Commission before they can operate.
There have been more things happening in the Hong Kong Web3 market in the past year than in every year before, and they have developed much faster than in the past.
Let’s review the policy regulatory developments in Hong Kong Web3 from June 1 last year to May 31 this year.
Before June 1, 2023, various exchanges, or institutions that intend to apply for exchange licenses, are busy building the simplest exchange to attract users in the fastest way and increase user trading volume.The purpose is to obtain the qualification of transitional expectations and can continue to operate until May 31 this year, and submit a license application during this period.
By the time the license application deadline ends on February 29 this year, there were a total of 24 applicants.There are many top exchanges among them, including Binance, Huobi, OK, kucoin, Gate, Bybit, etc.
Basically all top exchanges withdraw their applications.The most shocking thing is of course the news that OK decided to withdraw the application a few days ago.After all, OK has been known to have invested a lot of resources to apply for a license.
Regarding the withdrawal of the application by the leading exchange, I think the following interpretation can be made:
1. They all voluntarily withdrew their applications, not because the CSRC refused to apply.There is a clear difference between the two.Active withdrawal can be a factor that the exchange measures costs, future business development, and competitors, and finds that there is a big gap between the cost and future development, so it gives up.
2. The Hong Kong market is small, and the exchange only allows customers from 18 countries (mainly European and American countries) to register remotely.There are two licensed exchanges in Hong Kong, and two have obtained principled approvals, and the domestic market has not yet been opened.The competition among various exchanges can be said to be very huge.In the case of high operating costs, the market believes that the exchange cannot make money for at least a few years.
3. If everyone pays attention to Coinbase’s policy towards Hong Kong, they will find that in February last year, Coinbase issued an announcement to suspend Hong Kong users.However, starting this year, some people have discovered that Hong Kong users can register on Coinbase.This means that overseas exchanges may not operate in Hong Kong, promote in Hong Kong, and do not deliberately attract Hong Kong users, but still allow Hong Kong users to register on the platform.
4. All leading exchanges have some non-compliance situations, such as once opening contracts or derivative products to Hong Kong users.In 2018, the China Securities Regulatory Commission made it clear that any contract product belongs to the securities category and requires a license to be issued.Exchanges may be more difficult to explain past non-compliance, so it is more difficult to obtain a license.
Based on the above reasons, I think actively withdrawing the application is a rational choice.The long-term development, sustainability, cost-effectiveness, etc. of the entire exchange are the right choices.
By the way, looking back at the strategies of each exchange, it was a very clever move for Bitget affiliates to acquire OSL.No wonder Bitget is the fastest growing exchange in recent years.
Although exchanges are very important, they are only part of the entire currency circle ecosystem.The Hong Kong government has recently vigorously promoted tokenized securities and RWA.Most of RWA’s underlying assets are traditional securities products.Hong Kong’s regulators and investors are familiar with each other.
It is worth noting that GF Securities and NV Technology jointly issued tokenized short-term financing notes at the beginning of the year.Both institutions have Chinese-funded backgrounds or are friendly to Chinese-funded institutions.As a pioneer, GF Securities has the opportunity to allow more Chinese financial institutions to boldly promote virtual currency-related products in the future.
RWA has a wide range of application scenarios. If it is combined with the Hong Kong dollar stablecoin in the future, the possibility of horizontal development is greater.To give a fantasy example, if RWA products can be used as collateral to borrow Hong Kong dollar stablecoins, and stablecoins can be connected to decentralized product pledge, it can integrate the traditional market and the currency circle market.
Another point worthy of attention is the promotion of spot ETFs in Hong Kong.
Investors in spot ETFs can purchase through traditional securities investment accounts without the need to set up an additional virtual asset wallet and trading account.Unlike the ETFs in the United States, investors can also apply for redemption in physical virtual currency, and are open to retail investors.Hong Kong’s ETFs must have made history.
In addition, the virtual asset fund investment market seems to have become active again recently.It is also worth noting that this year’s latest investment immigration plan is launched.Although the products approved by the investment immigration program do not include virtual assets, limited partnership funds (LPFs) or open-end fund companies (OFCs) opened by licensed asset management companies of the China Securities Regulatory Commission can be used as investment amounts of 30 million yuan in investment immigration programs.Ten million, and both funds do not limit the assets or products that can be invested in.It means that both LPF and OFC can invest in virtual currencies.Therefore, no matter what, if you choose to invest in virtual currency, it is recommended that you need to cooperate with companies that have approved the upgrade to a company that can invest 100% virtual asset management.
In terms of licenses, in addition to exchange licenses, the Hong Kong government has also actively promoted stablecoin sandbox and OTC licenses this year.It is understood that the HKMA attaches great importance to the application scenarios of stablecoin licenses and believes that stablecoins should not be used as trading pairs on exchanges alone.Application scenarios should be wider and more useful than pure transactions.
The three licenses of exchange, OTC and stablecoin are supervised by three different government departments, but they are all coordinated by the Financial Affairs and the Treasury Bureau.Such arrangements will help the government establish a stable and transparent regulatory environment, maintain policy continuity, and enable Web3 to develop sustainably.
In summary, compared with last year’s overwhelming publicity and massive activities, this year, stakeholders from all walks of life have obviously bowed their heads to do practical things, prepare for the bull market, and do things for the development of Hong Kong’s Web3.Even so, I think there are more actual developments and opportunities than last year.
List of applicants whose license application has been returned, rejected or withdrawn:
