Hong Kong Initiates Crackdown on Unlicensed VASPs with May Deadline

• A transitional period will be granted to enable unregistered VASPs to apply for a license.
• This year, on February 29th, service providers must submit their licensing applications.

Applications for unlicensed virtual asset service providers (VASPs) are due on February 29th, and those who did not get approval were told to stop operations by May 31st, according to the financial services department of the Hong Kong government.

Given that certain VASPs were already operating in Hong Kong prior to the Securities and Futures Commission (SFC) instituting a licensing system, a transitional period will be granted to enable these VASPs to apply for a license, according to an official blog post by Christopher Hui, the Secretary for Financial Services and the Treasury of Hong Kong.

May 31st Deadline

This year, on February 29th, service providers must submit their licensing applications in order to continue operating in Hong Kong, according to Hui. The current service providers will be sent a “no-deeming notice” by the regulator if they are unable to fulfill the relevant standards established by the SFC.

Moreover, they have three months from the date of receipt of the notification, or May 31st, to end operations, according to the notice. In addition, by May 31, all current service providers are anticipated to have ceased operations, provided that their applications were not filed by February 29.

Also, according to Hui, the SFC is getting ready to do enforcement operations as the deadline for submitting license applications is coming up. Notifications to rejected service providers and increased exposure are part of this process.

The value and instability of virtual assets were also points of caution for investors, according to Hui. Many digital assets, according to Hui, have “no intrinsic value” and their values are quite unpredictable.

Additional concerns raised by Hui include the possibility of fraud on these platforms and the fact that unregistered operators and service providers may not adhere to regulatory standards.

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