OSL, Hashkey have already obtained regulatory licenses, leading the way and vigorously expanding their business; 12 institutions have followed suit as license applicants, vowing to carve out their own territory in the Hong Kong virtual asset market.
Author: Bowen, Pionex Salon
For the Hong Kong virtual asset market, the most important part of 2023 is undoubtedly the implementation of the licensing system for virtual asset trading platforms.
Whether it is Bitcoin or other virtual assets, trading has always been its most important application scenario. The global market has always regarded compliant exchanges as one of the key points of regulation. Countries such as the United States, Canada, and South Korea have already introduced a regulatory system for compliant exchanges to regulate the development of the virtual asset market.
There is no need to question Hong Kong's determination to build the world's Web3.0 financial center. In order to quickly catch up with the global market, the primary task is to launch a compliant virtual asset trading platform to provide the most basic guarantee.
In December 2022, the Hong Kong Legislative Council passed the "2022 Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill"; On June 1, 2023, a brand-new licensing system specifically for central virtual asset trading platforms (virtual asset trading platforms) under the "Anti-Money Laundering and Counter-Terrorist Financing Ordinance" officially took effect. The Hong Kong virtual asset trading platform has entered the era of compliance.
OSL and Hashkey have already obtained regulatory licenses, leading the way and vigorously expanding their business; 12 institutions have followed suit as license applicants, vowing to carve out their own territory in the Hong Kong virtual asset market.
In this issue, Pionex Salon will analyze the recent developments of OSL, Hashkey, and the 12 virtual asset license applicants, and see the full picture of the battle of Hong Kong virtual asset trading platforms for the readers.
(I) OSL, Hashkey Leading the Licensed Race
When it comes to compliant virtual asset trading platforms in Hong Kong, it is natural to mention the names of OSL and Hashkey. On August 3, 2023, both platforms announced on the same day that they had obtained the Securities and Futures Commission's approval to complete the license upgrade and can provide virtual asset trading services to retail clients. Compliant exchanges have officially entered the era of retail investors.
OSL
OSL has been operating at a loss in the Hong Kong virtual asset market for many years, and in 2023, the overall business operation finally turned towards the right track.
In the second half of the year, Hong Kong's virtual asset policies were successively implemented; then in October, the approval of the U.S. Bitcoin spot ETF was expected to trigger a bull market. OSL, which had been laying out for a long time, finally seized the opportunity and successively reached cooperation with institutions such as JPMorgan, Huaying Securities, Interactive Brokers, and Mulan Asset Management to enhance OSL's position in the Hong Kong virtual asset market.
For OSL, the policy changes also prompted OSL to change its blood to adapt to market development. On November 14, 2023, OSL announced on its official website that it had received a strategic investment of approximately 710 million Hong Kong dollars from BGX Group, with BGX holding 29.97% of the shares, becoming OSL's largest shareholder (formerly BC Technology Group, renamed). Bitget finally entered the Hong Kong virtual asset market in a compliant manner.
On January 12, 2024, BGX completed the transaction with OSL. Subsequently, the board of directors was reorganized, and Pan Zhiyong, the current CEO of BGX, was appointed as the new chairman and CEO.
In 2024, with the approval of the U.S. SEC for the listing of the Bitcoin spot ETF, a wave of capital from institutional investors is likely to enter the virtual asset industry to further consolidate its role in the traditional financial industry. After taking office, Pan Zhiyong identified four strategic pillars for OSL in 2024: global expansion, service innovation, digital financial synergy, and compliance standards, hoping to make achievements by leveraging OSL's existing compliance and technological advantages.
Everyone is waiting to see if OSL can seize the opportunities brought by these developments.
Hashkey
Hashkey still maintains its leading position in the Hong Kong virtual asset market.
After being online for 4 months, the number of users on Hashkey Exchange exceeded 150,000, with a daily average trading volume of 630 million U.S. dollars. It currently supports trading of 18 types of virtual assets on the platform. Currently, more than 10 brokerage fund comprehensive accounts have been opened, and cooperation has been established with more than 20 institutions. Six Hong Kong-listed companies: Shengyang Group, Tiger Media, Yangke Group, New Fire Technology, Blueport Interactive, and Huake Intelligent Investment have all chosen to open accounts on Hashkey.
In addition, the insurance platform OneDegree officially provided coverage for cold and hot wallets to Hashkey Exchange in November 2023. Hashkey has also reached cooperation with Huaxia Fund and Hamsa to jointly explore innovative tokenized products.
On January 16, 2024, Hashkey Group completed a Series A financing of nearly one billion U.S. dollars at a valuation of over 1.2 billion U.S. dollars, with new investors including large institutional investors, Web3 institutions, and strategic partners.
Dr. Xiao Feng, the leader of Hashkey, has always been an advocate and promoter of the principle of compliance first. In the context of the large-scale compliance in Hong Kong, it is not surprising that Hashkey has taken the lead.
However, in the global trend of compliance, unicorn exchanges such as Binance and OKX are also gradually embracing regulation and embarking on the path of compliance. When these powerful institutions and Hashkey step onto the same starting line of compliance, what kind of strategy will Hashkey use to deal with the challenges from them? It is worth looking forward to.
(II) 12 Applicants Following Closely
OSL and Hashkey still need to continuously defend their established positions. After them, Web3 veteran teams, traditional financial institutions, and pioneers in other industries have all entered the competition to grab a share of the Hong Kong virtual asset business.
HKVAX
On August 11, 2023, HKVAX received a preliminary approval notice from the Hong Kong Securities and Futures Commission, allowing it to conduct regulated activities of Type 1 and Type 7 (virtual asset 1&7 licenses), making it the third licensed virtual asset trading platform in Hong Kong. At the end of 2023, HKVAX conducted strategic fundraising and expressed its intention to apply for a VASP license.
According to public information, HKVAX's CEO Wu Weiliang previously served as the CEO of CoinSuper Premium, a cryptocurrency asset trading platform under the Hong Kong traditional financial group Pioneer Group. Before CoinSuper, CEO Wu Weiliang had cooperated with top financial institutions including Morgan Stanley, JPMorgan, and Wanjia Asset Management, and served as the Managing Director of the International Department of CITIC Futures.
From left to right: Operations Director Huo Zhaoliang and CEO Wu Weiliang
In January 2024, CEO Wu Weiliang attended the "2024 Qingdao·Hong Kong and Macao Financial Night" event and shared his views on the opportunities and challenges for Qingdao companies to develop virtual asset business.
吴炜樑 stated: "There are 'exclusive' blockchains in China, such as Wenchang Chain, Wuhan Chain, and Ant Chain, which are very different from the overseas blockchain Ethereum. Therefore, from a technical perspective, Hong Kong is the preferred platform for enterprises to develop virtual assets. Hong Kong supports all 'chains'. If we connect some domestic digital assets to Hong Kong through some domestic 'chains', such as linking to Ant Chain, and then change the underlying assets to Ethereum in Hong Kong and sell them to overseas companies, we can solve all the problems, whether they are technical or legal issues, through Hong Kong as a bridge, connecting some domestic businesses as products with overseas businesses."
Whether HKVAX will support this bridging task is worth paying attention to.
VDX
VDX, Victory Fintech Limited, is a subsidiary of the Hong Kong local brokerage Victory Securities. Its core strategic positioning focuses on the B2B virtual asset trading platform.
Victory Securities, as the first local brokerage in Hong Kong to obtain virtual asset licenses 1, 4, and 9, has become one of the winners after the implementation of the new virtual asset policies in Hong Kong in 2023. On November 24, 2023, Victory Securities became the first local brokerage in Hong Kong to be approved to conduct retail virtual asset business. Currently, the average monthly turnover is 10 million USD, and its virtual asset business has been profitable.
VDX's CEO comes from the traditional financial industry, with over ten years of high-frequency trading experience and 7 years of experience in the virtual asset industry; the COO previously worked at Deutsche Bank and Accenture and was a virtual asset expert at the Hong Kong Securities and Futures Commission. Several team members come from Tencent, Futu, and Tiger Brokers.
Compared to other virtual asset trading platforms, VDX operates its business in a more entrepreneurial manner. VDX's business mainly focuses on providing Web3 technology and liquidity solutions for cooperative financial institutions and ecological layout in native Web3 industry funds.
Victory Securities has been at the forefront, and it is believed that VDX will have new actions in 2024.
BGE
Hong Kong BGE Limited is a wholly-owned subsidiary of HKE Holdings, a listed company in Hong Kong. HKE Holdings Chairman Lian Haomin is the founder of Monmonkey Group Holdings Limited (Monmonkey Group), and holds Hong Kong traditional financial licenses 1, 4, and 9.
Lian Haomin, born in 1992
After graduating from a university in the United States in 2017, Lian Haomin worked and interned at institutions such as JP Morgan and China Taiping Group; he later found that the financial business in the family enterprise was losing money, so he asked his father to let him manage it. At that time, Xiaomi, Meituan, Alibaba, and other giants were listing in Hong Kong, and after taking over the Monmonkey Group under the family, Lian Haomin invested in Hong Kong IPO projects and secondary market projects, making the company profitable. Until 2021, when he stumbled on Evergrande Car Treasure.
On January 8, 2024, according to Sing Tao Daily, Lian Haomin invested tens of millions of dollars in blockchain-related projects over the past 3 years. After completing the acquisition of HKE Holdings in 2021, the HKE virtual asset exchange team has grown to over 120 people, and its exchange, BGE, may be the fastest to officially obtain the Securities and Futures Commission's virtual asset trading platform license in the first quarter of this year. After obtaining the license, the business is planned to expand to Southeast Asia.
HKbitEX
HKbitEX is part of Tykhe Capital, one of the four business segments of Tykhe Capital. Tykhe Capital's core business includes digital asset trading, capital markets and wealth management, digital asset custody, and technology research and development. On September 10, 2023, Tykhe Capital launched the PRINCE token, the first real estate STO for "professional investors" in Hong Kong, and also the first fund tokenization fundraising model approved by the Hong Kong Securities and Futures Commission.
Founder and CEO Gao Han previously worked at the Hong Kong Stock Exchange and was involved in Stock Connect and Bond Connect, and the platform also has several former employees of the Hong Kong Stock Exchange, forming a regular army of the Hong Kong Stock Exchange.
HKbitEX Founder Gao Han
In December 2023, HKbitEX signed a strategic cooperation agreement with the Shanghai Technology Exchange. The Shanghai Technology Exchange was jointly established by the Ministry of Science and Technology and the Shanghai Municipal Government. According to the memorandum, the Shanghai Technology Exchange will jointly explore financial solutions for science and technology enterprises based on asset tokenization with HKbitEX, including issues such as mismatch between financing needs and funding supply, valuation difficulties, and imperfect investment exit mechanisms.
It is expected that in 2024, HKbitEX will conduct more attempts with more partners in the RWA aspect.
Meex
The launch of Meex is a typical entry of a senior Web3 team into Hong Kong. On October 12, 2023, Meex Digital Securities Limited submitted an application for a virtual asset trading platform license to the Hong Kong Securities and Futures Commission.
Meex is supported by a Hong Kong consortium and focuses on asset security. Client assets are independently held by TCSP licensed company Meex Custody Services Limited. It is currently applying for virtual asset licenses 1, 7, and VASP.
Jason FENG serves as Meex CEO, previously serving as the acting CEO of Jiayuan Agency. CTO Lu Zhichao previously served as the technical director of Bybit. Operations Manager Vince Lam previously served as the operations manager of the exchange HKbitEX, which is also applying for a license. Other team members include licensed individuals from the Hong Kong Securities and Futures Commission and legal professionals.
Zhongan International, Huawei Cloud Hong Kong, and others are strategic partners of Meex. After the implementation of the new virtual asset trading platform licensing system in Hong Kong, Meex was the fastest among the new applicants to gain an advantage. Whether it can gain more advantages remains to be seen.
PantherTrade
Panthertrade (Hong Kong) Limited, a subsidiary of Futu Securities, submitted an application for a virtual asset trading platform on November 15, 2023. According to insiders, Panthertrade (Hong Kong) Limited is another strong entry of a traditional brokerage into the virtual asset market.
On March 7, 2023, Panthertrade submitted the establishment form, with the first director being Fang Xingzhi, who previously worked at JD Securities Limited. On September 14, 2023, PantherTrade appointed Chen Zhihu as a director, who previously served as the investment director of Huobi Asset Management (Hong Kong) Limited; another director is Hong Yimin.
As early as 2021, Futu Securities had begun to expand its layout in the cryptocurrency industry. In April 2021, a user in the Futu Bull platform asked Futu Securities CEO Li Hua whether Bitcoin could be traded on the platform in the future. Li Hua replied, "Hong Kong and overseas customers have a great opportunity, but mainland customers probably cannot."
However, due to regulatory requirements at the time, the trading of stocks such as GBTC and EHTE was forced to be suspended. With the return to the virtual asset market in Hong Kong this time, the regulatory environment has changed significantly. Whether Futu Securities has been fully prepared during the years of waiting, there will soon be an answer.
OKX
Unlike other competitors, OKX's entry conveys two signals to everyone. First, the compliance of global virtual asset trading platforms has become a major trend; second, the future of Hong Kong will undoubtedly be the center of global virtual asset market activities.
In 2023, Binance and CZ compromised with the US SEC and paid a huge fine, and the first unicorn in the cryptocurrency industry chose to embrace regulation, proving that compliance is an irreversible fact for anyone. For top exchanges like OKX, choosing to complete compliance as soon as possible is undoubtedly the best choice.
On January 16, 2024, OKX's Middle East affiliate (OKX Middle East) officially obtained a virtual asset service provider (VASP) license from the Dubai Virtual Asset Regulatory Authority (VARA). The license will come into effect after OKX Middle East meets all the remaining conditions and specific localization requirements listed by VARA. At that time, OKX Middle East will officially start operations after the review and approval of the regulatory authorities.
OKX's compliance progress is steady, and its arrival in Hong Kong is only a matter of time. The market is concerned about what kind of impact OKX will bring after officially entering Hong Kong? Will it adhere to the responsibilities of the exchange, or will it boldly innovate and launch more products to lead the transformation of the virtual asset market in Hong Kong? We look forward to OKX's response.
VAEX
Similar to OKX, the establishment and license application of VAEX is also a move by established cryptocurrency exchanges to embrace compliance.
On November 25, 2023, VAEX became the 8th applicant for a virtual asset trading platform license. As early as February 2023, KuCoin officially announced through official channels that it would provide technical support to VAEX. Now that VAEX has entered Hong Kong, in a sense, it is an action taken by KuCoin to embrace regulation.
KuCoin's investment arm, KuCoin Ventures, is also very active in Hong Kong. In March 2023, the company led a $10 million investment in CNHC, a stablecoin issuer in Hong Kong.
Three months later, in a continuously changing regulatory environment in 2023, the platform confirmed the tightening of its compliance procedures by introducing mandatory KYC identity checks. It can be predicted that if VAEX successfully lands in Hong Kong, it will have more interactions with KuCoin, helping KuCoin establish a stronger foothold.
Accumulus
The entry of Accumulus represents another trend: domestic traditional internet companies and traditional enterprises can also choose to achieve broader business expansion through virtual assets and the Hong Kong market.
Cloud Account Technology (Tianjin) Co., Ltd., a Fortune 500 company in China, was approved for an overseas investment quota of over 1.1 billion Hong Kong dollars. It established Accumulus GBA Technology (Hongkong) Co., Limited in Hong Kong, with a registered capital of over 1.1 billion Hong Kong dollars. On December 6, 2023, it officially submitted an application for a virtual asset trading platform license to the Hong Kong Securities and Futures Commission.
Cloud Account has been providing flexible employment services for 7 years and is now one of the largest online human resources service companies in China. It has provided flexible employment services to over 82 million freelancers in more than 120 countries and regions worldwide, with a revenue of over 110 billion Hong Kong dollars in 2022.
Chairman Yang Hui is a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), a standing committee member of the All-China Federation of Industry and Commerce, a standing committee member of the Tianjin Municipal Committee of the CPPCC, a vice chairman of the Tianjin Municipal Federation of Industry and Commerce, a standing committee member of the Tianjin Municipal Committee of the China Democratic National Construction Association, a vice president of the Tianjin Municipal Federation of Industry and Commerce, a standing committee member of the Tianjin Binhai New Area People's Congress, and a member of the China Democratic National Construction Association.
Among all the applicants for virtual asset trading platforms, the background of the Accumulus team is the most unique. With the backing of mainland resources, it has special advantages in capital and talent transfer. If it focuses on long-term development with security as a priority, Accumulus may achieve results. However, on the other hand, the mainland region, which has been isolated from the global virtual asset market for a long time, has significant differences in technology and cognition, and there is a great deal of uncertainty as to whether the platform and business will gain market acceptance.
Regardless, we hope that Accumulus can successfully take root in Hong Kong and perhaps provide strong support for the development of the Web3 field in the mainland.
DFX Labs
DFX Labs Company Limited became the last applicant for a virtual asset trading platform license in 2023, submitting the application on December 27, 2023.
Chief Operating Officer Simon Au Yeung graduated from the Wharton School. Previously, he served as the CEO of Blockchain Finance and BGE. After leaving BGE, he co-founded IEEE and joined DFX Labs in September 2023.
The DFX official website is in trial operation and will support BTC and ETH trading.
HKVAEX
HKVAEX was established in December 2022 and launched a virtual asset trading platform in 2023.
Stanley Fung serves as the CEO of HKVAEX. Stanley Fung graduated from the University of Toronto. Before joining HKVAEX, he served as the head of business at New Fire Technology Exchange and as the CEO of Huobi Hong Kong.
Previously, the South China Morning Post, a Hong Kong media outlet, indicated that there is evidence that HKVAEX was established as part of Binance's layout in Hong Kong. However, Binance later denied this news, stating that "HKVAEX" does not belong to any company under Binance.
In June 2023, HKVAEX participated in supporting the launch of the "Virtual Asset Index" and "Virtual Asset Exchange Rating" by HKVAC, providing third-party reference data for professional investors and the public to participate in market activities. In addition, the HKVAEX team actively participated in various virtual asset exchange activities in Hong Kong, including InvestHK, Tencent Cloud, and Cyberport Conference.
Whether the senior Web3 background and active market participation of HKVAEX can help it take root in Hong Kong remains to be seen.
BitHarbour
The last applicant submitted the application on January 11, 2024. BitHarbour (Hong Kong) Limited, trading platform name BitHarbour, is also the least publicly disclosed applicant.
However, in the BitHarbour service agreement, one clause states that users must "agree that all investment operations conducted on CoinEx represent their true investment intentions and unconditionally accept the potential risks and returns of investment decisions." It is speculated that there is some business relationship between BitHarbour and CoinEx.
Conclusion
Overall, virtual asset trading platforms in Hong Kong can be divided into three categories: senior Web3 companies, traditional financial institutions, and determined Web3 innovators. Senior Web3 companies have obvious advantages, with rich experience and market awareness; traditional financial institutions have potential capital and a huge customer base; and entrepreneurs may face many challenges.
We cannot predict who will ultimately emerge victorious. But regardless of the winner, the fierce competition in virtual asset trading platforms has already shown that the future of the virtual asset market cannot be separated from Hong Kong.
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