Hong Kong crypto exchange folds to regulatory pressure

Hong Kong-based cryptocurrency exchange Gate.HK has closed down after failing to meet the local licensing requirements that will be enforced starting June 1.

The Securities and Futures Commission of Hong Kong (HKSFC) mandated that all crypto exchanges in the region acquire an operational license. Exchanges that failed to apply for a license must stop their services by May 31.

Following this requirement, Gate.HK submitted its 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List of applicants whose license applications have been returned, refused or withdrawn. Source: HKSFC

As of May 23, Gate.HK has ceased all activities related to acquiring new users and marketing. Existing users can no longer make deposits and are restricted to withdrawing funds only until Aug. 28.

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

The crypto exchange intends to relaunch its services only after reconstructing its platform to comply with Hong Kong’s regulatory requirements. These requirements include establishing Anti-Money Laundering (AML) and counter-terrorism financing measures. The company said:

Gate.HK is actively working on the aforementioned overhaul. We plan to resume our business in Hong Kong in the future and contribute to the virtual asset ecosystem after obtaining the relevant licenses.

Before Gate.HK's exit, three other exchanges — Huobi HK, QuanXLab, and IBTCEX — also withdrew their license applications in May. Altogether, nine crypto exchanges have withdrawn their applications in Hong Kong.

As of May 24, twenty cryptocurrency exchanges are still active applicants for Hong Kong's crypto license.

A recent Bloomberg report indicated that the HKSFC is considering allowing spot ETH exchange-traded fund (ETF) issuers to include an ETH staking option, enabling them to generate passive income.

The SFC reportedly discussed providing staking services via licensed platforms with the country’s crypto ETF issuers after fielding proposals in recent weeks.

The financial regulator is currently discussing the matter, and there is no set timeline for implementation.