The only compliant cryptocurrency exchange in Hong Kong, HashKey Exchange, has gained recognition from the Hong Kong Securities and Futures Commission (SFC). With the withdrawal of license applications from other exchanges such as OKX, HashKey and OSL now have a monopoly in the market.
However, even licensed operators in Hong Kong face restrictions. Currently, stablecoin trading pairs are not available, and the offering of financial products is prohibited. Stablecoin issuance is still in the financial sandbox stage, and there are limitations on listing cryptocurrencies. There are also strict consumer protection regulations such as asset segregation and insurance.
Due to these limitations, compliant operators in Hong Kong cannot operate diversified products and currencies like offshore exchanges, thus limiting their profitability.
HashKey Exchange operates both a Hong Kong platform and an international platform. Recently, the international platform launched the Launchpool activity for Polyhedra Network (ZKJ) and promoted itself as a licensed exchange. However, while the Hong Kong platform is licensed, the international platform does not meet Hong Kong’s regulatory requirements. The use of “licensed compliance” to describe its compliance is a form of borderline promotion, using the Hong Kong license to gain customer trust. Such promotional activities should be viewed neutrally.
With different laws regarding exchanges in different countries, and the rapid development of exchange businesses, it is rare to find a compliant exchange that offers diversified services (spot, futures, and wealth management). Countries with a licensing system such as Japan, Singapore, and Hong Kong have strict business regulations and mostly only operate as spot trading markets with many restrictions. They also do not serve customers outside their jurisdiction. Some offshore exchanges selectively apply for financial licenses in various countries, such as the US MSB license, as a form of compliance proof. However, these licenses cannot be verified by regulatory authorities, let alone protect investors.
Therefore, international exchanges such as Binance and FTX have attempted to establish compliant entities in individual regions and isolate overseas users. The purpose is mostly to demonstrate a proactive attitude towards compliance, albeit at the cost of sacrificing business interests and incurring significant costs.
In contrast, HashKey Exchange has taken the opposite approach by expanding its international platform while being compliant in Hong Kong. This may be a strategic move for many region-specific compliant exchanges.
However, it is important for international users to understand the local compliance requirements and not extend these concepts to the international version of the platform.
In the immature regulatory environment of global exchanges, most of them protect international users in diversified products through self-regulation.
HashKey
Launchpool
Polyhedra Network
ZKJ
[Source: Article title: “Hong Kong’s only compliant exchange, HashKey, is hard to come by after OKX discontinues license application”]