As many as 11 entities are applicants for a full license with the regulator.

• Hong Kong’s regulator has found “unsatisfactory practices” at some crypto exchanges seeking full licenses in the region after conducting on-site inspections.
• If this results in the cancellation of some temporary licenses handed out to the 11 applicants for full licenses, it may throw a spanner in the works of Hong Kong’s pursuit of trying to become a global hub for crypto.

Hong Kong’s Securities and Futures Commission (SFC) has found “unsatisfactory practices” at “some” of the cryptocurrency exchanges seeking a full license from it after conducting on-site inspections, Bloomberg reported on Thursday, citing people familiar with the situation.

“Some of the crypto firms are overly reliant on a handful of executives to oversee the custody of client assets, while others aren’t properly guarding against cybercrime risks,” the report cited.

An SFC spokesperson told Bloomberg that while it had conducted some inspections which were still ongoing and subject to change, it doesn’t comment on specific cases.

For platforms that are unable to remedy “critical deficiencies identified during on-site inspections, the SFC may opt to remove their deemed-to-be-licensed status or refuse their license applications,” the spokesperson added.

The SFC declined to add any more details to the statement given to Bloomberg.

The SFC has not named which entities had “critical deficiencies.” As many as 11 entities have applied for a full license with the SFC, including Crypto.com, HKbitEX, PantherTrade and Bullish, the Bloomberg report said.

The applicants named did not immediately respond to CoinDesk’s request for comment. Bullish is the owner of CoinDesk.

In late May, the SFC said it would conduct such on-site inspections of those crypto trading platforms which were interested in continuing to pursue their licensing applications. As many as 12 entities including OKX and ByBit withdrew their applications. OSL and HashKey are the only two fully licensed exchanges in Hong Kong.

The latest development may throw a spanner in the works of Hong Kong’s pursuit of trying to become a global hub for crypto which saw it approve spot-crypto products earlier this year.