In recent regulatory actions, Hong Kong’s Securities and Futures Commission (SFC) has taken a firm stance against cryptocurrency exchange MEXC by adding it to its cautionary list on March 15. This development highlights the SFC’s vigilance in ensuring compliance within the crypto industry, especially regarding licensing requirements for operating in Hong Kong.
MEXC under the scrutiny of Hong Kong’s SFC
MEXC has been under scrutiny for actively promoting its services to investors in Hong Kong without obtaining the necessary licenses from the SFC, particularly the virtual asset trading platforms (VATP) license essential for legal operation in the region. This lack of proper licensing puts MEXC in violation of Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which deems providing virtual asset services, including operating a virtual asset exchange, without proper authorization as unlawful.
The SFC’s warning serves as a reminder to all entities operating in the crypto space to adhere to regulatory requirements to avoid legal repercussions. The SFC’s action against MEXC comes shortly after it added the Bybit crypto exchange to its cautionary list, underscoring the regulatory scrutiny faced by unlicensed crypto exchanges in Hong Kong.
Currently, the SFC’s cautionary list comprises 20 cryptocurrency exchanges lacking the necessary licenses to operate in the region. Despite its unlicensed status, MEXC remains a significant player in the crypto market, ranking as the world’s 11th-largest cryptocurrency exchange by trading volume. It boasts a substantial 24-hour trading volume exceeding $2.19 billion and offers access to a wide array of 1,942 cryptocurrencies, attracting a sizable user base with over three million weekly visits.
Impersonation and the blacklisting of fake websites
It is worth noting that the SFC has previously taken decisive action against fake websites impersonating legitimate local crypto exchanges. On March 4, the SFC issued a warning regarding multiple suspicious websites impersonating licensed crypto trading platforms, including OSL Digital Securities and Hash Blockchain Limited (also known as HashKey).
Some of these fraudulent websites also posed as MEXC, prompting the SFC to blacklist eight domains impersonating MEXC on February 9. In terms of regulatory compliance, crypto exchanges operating in Hong Kong were mandated to submit VATP applications by February 29. Failure to comply with this requirement means that unlicensed firms must cease operations in the Special Administrative Region by May 31.
Additionally, exchanges whose VATP applications are rejected by the SFC must vacate the city within three months, further emphasizing the importance of regulatory adherence in the crypto industry. Presently, only two crypto exchanges in Hong Kong hold official licenses from the SFC. OSL Exchange acquired its license on December 15, 2020, while HashKey Exchange was licensed on November 9, 2022. These licensed exchanges serve as benchmarks for regulatory compliance within the industry, providing investors with a secure and transparent trading environment in Hong Kong’s evolving crypto landscape.