The Hong Kong government’s financial services department highlighted the Feb. 29 deadline for unlicensed virtual asset service providers (VASP) applications and said those not approved must cease operations by May 31. 

In an official blog post, Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, wrote that since some VASPs were operating in Hong Kong before the Securities and Futures Commission (SFC) established a licensing system, there will be a transitional period, allowing the VASPs to apply for a license.

“If these service providers would like to continue their operations in Hong Kong, they have to submit their license applications by 29 February this year,” Hui added.

According to the regulator, if the existing service providers cannot meet the relevant requirements set by the SFC, they will be issued a “no-deeming notice.” The notice means that they will need to cease operations by May 31 or three months after receiving the note. Furthermore, all existing service providers that have not submitted their applications by Feb. 29 are expected to cease operations by May 31.

Since the deadline for submitting license applications to meet the requirements is approaching, Hui wrote that the SFC is already preparing for enforcement work. This includes issuing notices to disapproved service providers and ramping up its publicity efforts.

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The official also warned investors about the volatility and value of virtual assets. Hui argued that many digital assets have “no intrinsic value” and that prices are volatile. He explained:

“Before engaging in related investments, it is essential to understand the details and consider the risks involved. For VA transactions, only platforms officially licensed by the SFC should be used.”

The official added that unlicensed operators and service providers may not be compliant with regulatory requirements and said that such platforms “may also have been involved in fraud.”

Within the same post, the official said they are also considering regulating over-the-counter (OTC) trading venues. The official added that OTC venues have played certain roles in some fraud cases involving trading platforms in 2023. Because of this, they will be launching a consultation on a proposed regulatory framework.

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