Hong Kong securities watchdog places major crypto exchange Bybit on alert list as local unit seeks licence in the city

Hong Kong securities watchdog places major crypto exchange Bybit on alert list as local unit seeks licence in the city

Hong Kong securities watchdog places major crypto exchange Bybit on alert list as local unit seeks licence in the city

Hong Kong’s Securities and Futures Commission (SFC) has warned investors about trading on Bybit, one of the world’s largest cryptocurrency exchanges, after placing the platform on an alert list, even as its local unit is applying for a licence in the city.

A number of Bybit’s cryptocurrency investment products have been offered to Hong Kong investors even though no entity within the group is licensed to operate in the city, according to the SFC’s statement on Thursday. It said the exchange was under scrutiny for offering suspicious virtual-asset trading products.

The SFC pointed out that those trading on an unlicensed platform “risk losing their entire investment” if the entity “ceases operation, collapses or otherwise suffers from any misappropriation of assets”.

“Seeking recourse against entities that do not have a nexus with Hong Kong is likely to be difficult and legal remedies may not be available,” the regulator said.

Hong Kong’s Securities and Futures Commission warns investors in the city about the risks of trading on an unlicensed cryptocurrency exchange. Photo: Shutterstock

Bybit said it is unable to comment on any specific product or regulatory inquiry, according to an emailed statement to the South China Morning Post on Friday.

The company said it “maintains a close dialogue” with regulators around the world, including Hong Kong, and “strives to comply with all applicable regulations”.

It also lists different products for various regions to meet local compliance requirements. “You can be confident that [certain] products are not available in the Hong Kong market,” the company said.

The SFC’s latest warning reflects Hong Kong’s efforts to ensure that local cryptocurrency activities adhere strictly to existing virtual-asset regulation.

Hong Kong securities watchdog puts virtual asset trading platforms on fraud alert

That regulation went into effect last year as an amendment to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, in which companies selling or marketing cryptocurrencies to Hong Kong residents must apply for a licence by February 29 or cease business in the city by June 1.

In its statement on Thursday, the SFC said the Hong Kong entity of Bybit, Spark Fintech Limited, was not involved in providing services related to the crypto products that the regulator has warned against.

Spark Fintech filed its application for a virtual-asset trading platform licence to the SFC on January 31, according to the regulator’s website. It is one of the largest crypto exchanges among 24 licence applicants in Hong Kong.

Being placed on the SFC’s alert list, however, could complicate the efforts of Bybit’s local unit to get licensed in the city.

Hong Kong joins many governments in beefing up crypto rules: report

A key factor that the SFC takes into consideration in the licensing process is whether the applicant follows all relevant laws and regulations, and “the strength of its compliance programme and track record”, said Andrew Fei, a partner at law firm King & Wood Mallesons in Hong Kong.

“Generally, being associated with a company that’s named in an SFC public warning is probably not ideal,” Fei said.

Launched in 2018, Bybit is currently the world’s second-largest cryptocurrency exchange by 24-hour trading volume after Binance, according to market tracker CoinGecko.

It is also the fourth-largest exchange by monthly visits, CoinGecko said, citing data from SimilarWeb.

Headquartered in Dubai, Bybit currently has more than 20 million users and handles a daily average trading volume worth more than US$10 billion. Photo: Shutterstock
Bybit in April last year moved its global headquarters from Singapore to Dubai, calling the most populous city in the United Arab Emirates “one of the most progressive digital-asset hubs in [the Middle East and North Africa] and the world”.

As Hong Kong moves ahead with a mandatory licensing regime for centralised crypto exchanges, Bybit in May last year launched a separate platform just for users based in Hong Kong.

Its main global platform displays a pop-up message for users with a Hong Kong internet protocol address, saying that the city’s residents can only use its local platform.

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