Crypto platforms operating in Hong Kong might be experiencing an adrenaline surge; as of June, a new virtual asset trading platform licensing regime triggers possible costs up to a whopping $20 million. A turn of events that could have smaller market players exit stage left. OSL and HashKey, two providers with a foothold, received approval, and can now provide retail services.
Factoring in costs such as necessary application vendors (consultants, lawyers, etc), and operating costs, obtaining a new license might range between $12 to $20 million. This new system may affect companies with lighter pockets, discouraging them from joining the race.
Even though the financial strain include high consultancy charges, mandatory high paid-up share capital, and a substantial amount of liquid assets, interestingly, license handlers will be required to have local existence with seed phrases and private keys stored within Hong Kong.
While this new regime may prune some smaller and potentially nefarious players in the industry like SOMA.finance out of the system, there will also be some winners. Big players like Hex Trust, who have the necessary capital and meet the compliance criteria, may find this new regime beneficial.
Despite China’s ban on virtual asset trading, Hong Kong seems to be shaping itself as a potential testing ground for internationally forbidden activities in mainland China. All signals underline Hong Kong’s strong ambition of becoming an epicentre for digital assets. Striking examples, such as allowing local residents to invest in virtual assets or recent implementations focus on Web3 technologies, reflect nothing but a solid digital asset embracement.
The new regulations, besides stimulating a rush for applications, could set a strong backbone by attracting more capital into the system, enhancing financial safety, and increasing confidence among institutional investors.
However, critics argue the new system is challenging. With restrictions on the type of tokens traded and the prohibition of external custodians, it looks complex for potential applicants. They also put a heavy requirement on platforms to have insurance covering potential losses, a financial burden that could be transferred onto the user.
The bottom line, as Hong Kong’s leaders are inviting global exchanges to apply for licenses, the future is bright and hopeful for the big players. However, for the smaller exchanges, they might have to take a step back and reassess their strategies. All eyes are now focused on this Asian hub, waiting to see if Hong Kong will turn into a land of crypto opportunities or challenges.
Source: Coindesk
