Testing Compliance: Opening Accounts at Top Crypto Platforms in Hong Kong

Top crypto exchanges are continuing to service customers in Hong Kong despite a ban on unlicensed platforms that took effect on May 31.

I should know. I live in Hong Kong and to test which crypto exchanges were changing their onboarding processes for residents, I tried to open accounts at the top 10 global platforms over the last week.

I succeeded at Binance, Coinbase, and Kraken even though official records show none of them have applied for a licence, let alone obtained one.

Regulators are hoping the new licence regime will curb runaway crypto crime in the city.

Investors are losing hundreds of millions of dollars worth of deposits to online exchanges that disappear without a trace and to a raft of exotic schemes ranging from romance scams to fake crypto lawyers promising to recover stolen assets.

In 2023, crypto crime cases jumped 46% over the prior year, according to the Securities and Futures Commission, or SFC, which watchdogs the markets.

And that doesn’t include more than 6,200 complaints made against JPEX, the exchange that vanished last fall with an estimated $200 million in client deposits, according to police officials.

The SFC says its licensing regime will let investors select reputable crypto exchanges from a roster it maintains on its website.

To qualify, exchanges needed to apply by February 29. Those that didn’t were given until May 31 to wind down their services. Companies that have applied for licences are allowed to continue operating until the SFC decides whether to approve their applications.

Some platforms have complied with Hong Kong’s new rules. HashKey Exchange secured a licence. So has OSL.

Other exchanges have opted to pull up stakes.

OKX and Bybit, which until recently were applying for licensing in Hong Kong, have wound down their services and withdrawn their petitions. So, too, did Gate.io (as Gate.HK), HTX, and HKVAEX, a Binance-linked company.

Several, including ByBit, OKX, Mexc, and KuCoin, blocked access to signing up for new accounts.

Binance, Coinbase, and Kraken have not applied for a licence in Hong Kong, but are still servicing customers in the region. Binance even made efforts to get licensed through a local company, HKVAEX, which later withdrew its application.

Coinbase, on the other hand, did not apply for a licence in Hong Kong and is not regulated there, according to the SFC’s list. However, the company’s website still allows residents to open accounts and trade cryptocurrencies.

Kraken’s website also does not mention Hong Kong in its terms of service, but the platform still allows residents to open accounts and trade cryptocurrencies.

Despite the new licensing rules, some of the top crypto exchanges are still operating in Hong Kong, raising questions about compliance and regulation in the industry.