Hong Kong’s cryptocurrency exchange is buckling under regulatory pressure

Hong Kong-based cryptocurrency exchange Gate.HK has been shut down after failing to meet local licensing requirements that will come into effect on June 1.

The Hong Kong Securities and Futures Commission (HKSFC) has ordered all cryptocurrency exchanges in the region to obtain an operating license. Exchanges that have not applied for a license must discontinue services by May 31.

In line with this requirement, Gate.HK submitted a license application to the HKSFC on February 28. However, the exchange withdrew the application on May 22, citing the need for a “major overhaul” of its trading platform.

List of applicants whose license applications have been returned, rejected or withdrawn. Source: HKSFC

As of May 23, Gate.HK has ceased all user acquisition and marketing activities. Existing users can no longer deposit and can only withdraw funds until August 28.

Gate.HK will shut down its trading platform on May 28, when all tokens will be permanently delisted. The token list included Bitcoin ($67,343 BTC), Ether ($3,704 ETH), Solana ($166 SOL), Polygon ($0.7229 MATIC), and Tether ($1.00 USDT).

The cryptocurrency exchange intends to restart its services only after rebuilding its platform to meet Hong Kong’s regulatory requirements. These requirements include the establishment of anti-money laundering (AML) and counter-terrorism financing measures. The company said:

Gate.HK is actively working on the mentioned renovation. In the future, we plan to resume our operations in Hong Kong and contribute to the virtual asset ecosystem after obtaining appropriate licenses.

Before Gate.HK’s departure, three other exchanges – Huobi HK, QuanXLab and IBTCEX – also withdrew their license applications in May. A total of nine cryptocurrency exchanges have withdrawn their applications in Hong Kong.

As of May 24, twenty cryptocurrency exchanges are still actively bidding for a Hong Kong crypto license.

A recent Bloomberg report indicated that the HKSFC is considering allowing issuers of ETH Exchange Spot Funds (ETFs) to include an ETH staking option, enabling them to generate passive income.

The SFC has reportedly discussed providing staking services through licensed platforms with domestic cryptocurrency ETF issuers after submitting proposals in recent weeks.

The financial regulator is currently discussing this issue and there is no set timetable for implementation.