HTX Abandons Plan to Launch Crypto Exchange in Hong Kong

Hong Kong’s crypto market has faced a setback as HTX, one of the world’s largest crypto exchanges, withdrew its application for a virtual asset trading license. HTX, formerly known as Huobi Global, had submitted its application to the Securities and Futures Commission (SFC) on February 20, but decided to pull out three days later, without giving any reason.

HTX’s Surprise Move

HTX’s withdrawal came as a surprise to many in the crypto industry, as the exchange had previously expressed its intention to launch a new platform called Huobi Hong Kong and pursue a license in the city. In June 2023, HTX’s adviser Justin Sun, a prominent crypto entrepreneur, told CoinDesk that he expected HTX to receive a Hong Kong crypto trading license in 6 to 12 months.

However, HTX apparently changed its mind and gave up on its plan to operate a legal crypto exchange in Hong Kong. A spokesperson for HTX did not respond to a request for comment. The SFC confirmed on its website that HTX had withdrawn its application on February 23.

Hong Kong’s Crypto Regulation

Hong Kong has been tightening its regulation of the crypto sector in recent years, in line with global standards and recommendations. In November 2023, the SFC announced a new framework for licensing and supervising virtual asset trading platforms, which aimed to bring them under its oversight and protect investors from fraud and risks.

Under the new framework, crypto exchanges that offer trading of at least one security token are required to apply for a license from the SFC and comply with its rules and regulations. These include anti-money laundering, investor protection, and market integrity measures. The SFC also set a deadline of February 28, 2024, for existing crypto platforms to submit their applications or cease their operations in Hong Kong.

According to the SFC website, as of February 27, 2024, there were 10 crypto platforms that had applied for a license, including Crypto.com, Bitfinex, and OKEx. However, none of them have been granted a license yet, as the SFC is still reviewing their applications and conducting due diligence.

HTX’s Challenges and Opportunities

HTX’s withdrawal from Hong Kong may reflect its challenges and opportunities in the global crypto market. HTX, which was founded in China in 2013, had to exit the mainland market in 2017, after the Chinese government banned crypto trading and initial coin offerings. Since then, HTX has relocated its headquarters to Seychelles and expanded its presence in other regions, such as Singapore, Japan, and South Korea.

HTX is currently the fifth-largest crypto exchange in the world by trading volume, according to CoinMarketCap. However, it has also faced some security breaches and legal issues in the past. In November 2023, HTX lost $125 million worth of various tokens from its hot wallet, after a hacker exploited a vulnerability in its system. HTX claimed that the loss was within manageable limits and that it would cover the losses for its users.

HTX also owns another crypto exchange, Poloniex, which was acquired by Sun in 2020. Poloniex has also suffered from hacks and lawsuits, and has been accused of market manipulation and insider trading. In December 2023, Poloniex agreed to pay $10 million to settle a civil suit filed by the US Securities and Exchange Commission, which alleged that Poloniex operated as an unregistered securities exchange.

Despite these setbacks, HTX may still have some opportunities to grow and innovate in the crypto space. HTX has been investing in blockchain technology and decentralized applications, and has launched its own blockchain platform, HTX Chain, and its native token, HTX. HTX has also partnered with other crypto projects, such as Tron, Filecoin, and Terra, to offer various services and products to its users.

HTX may also seek to enter other markets that have more favorable or flexible regulations for crypto exchanges, such as the US, Europe, or the Middle East. HTX may also explore other business models, such as decentralized exchanges, peer-to-peer platforms, or custodial services, to diversify its revenue streams and reduce its regulatory risks.