SFC puts small Hong Kong crypto exchanges under glare of public scrutiny as they pursue virtual asset licences
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The named entities are Hong Kong Virtual Asset Exchange (HKVAX), Hong Kong Digital Asset Exchange (HKbitEX), Hong Kong BGE and Victory Fintech, all of which say on their websites that they are committed to operating in accordance with crypto regulations. The SFC has cautioned that applying for a licence does not mean a company is already in compliance.
Some exchanges have publicly announced this year that they are, or will be, pursuing licences in the city, hoping to reassure potential customers. But only four companies have officially started the process, none of which are household names like industry giant Binance.
Hong Kong to reveal crypto applicants’ names as JPEX scandal worsens
Hong Kong to reveal crypto applicants’ names as JPEX scandal worsens
The SFC previously did not want to disclose the names of exchanges applying under the virtual asset trading platform licensing scheme that went into effect in June, lest it give consumers a false sense of security. The regulator has said crypto traders should only buy from licensed exchanges, but there are only two in Hong Kong so far – HashKey and OSL.
Although none of the four applicants claim to be licensed, all say they are operating in accordance with regulations. HKVAX – the oldest exchange of the group having been founded in 2018 – does have an approval-in-principle from the SFC, according to the company, which is a step towards becoming fully licensed.
Like the other applicants, HKVAX primarily targets professional and institutional investors with brokerage, exchange and custodial services. Virtual assets put into custody are 100 per cent-covered by insurance, according to the company.
![Joseph Lam Chok (dark suit) holds a press briefing at his home on September 22. Lam, who has been released on bail, was arrested on September 18 in connection with the city’s JPEX cryptocurrency scandal. Photo: SCMP / Jelly Tse](https://cdn.i-scmp.com/sites/default/files/d8/images/canvas/2023/09/26/4ce304b7-bfb9-4b86-9b01-43759743e81d_b3ee84ec.jpg)
Similarly, HKbitEX’s website emphasises the exchange’s offerings to professional investors, and it describes itself as “one of the first organisations in Asia-Pacific to apply for a ‘virtual asset trading platform licence’” from the SFC.
The exchange was founded in 2019 by CEO Gao Han, chief business officer Wang Shibin, chief technology officer Zuo Tao, chief information officer Cheng Yue and chief strategy officer Ken Lo.
Slightly more is known about Hong Kong BGE and Victory Fintech, as both are owned by companies listed on the Hong Kong stock exchange.
Hong Kong BGE was started in 2021 as a subsidiary of HKE Holdings, a fintech firm that went public in 2018 after the holding company was acquired by investor Lin Ho Man, now the company’s 30-year-old chairman. BGE’s services are not widely available to the public yet, with its website displaying a notice saying it is in a soft launch for select users.
In February, HKE made a filing to Hong Kong Exchanges and Clearing saying it had named Simon Au Yeung Kin Nam as BGE’s CEO, after he previously headed HashKey’s strategic initiatives. However, the executive’s LinkedIn page shows that he left the company this month.
HKE reported S$10 million (US$7.3 million) in revenue for the year ended June 2022, but S$10.9 million in losses. A final tally for the latest financial year is not available yet, but the company expects losses will expand to S$11.2 million, with revenue of S$14.5 million, according to a financial filing.
Victory Fintech is wholly owned by crypto exchange operator VDX Group, which is partially owned by Victory Securities, a financial services company started in 1971. VDX had HK$48,001 in revenue last year, according to Victory Securities’ annual report, and losses of HK$24.3 million. It also had HK$5.5 million in assets with HK$20.7 million in liabilities.
VDX chief operating officer Donald Day described Victory Fintech as a “fully regulated digital asset platform” that “is led by a very experienced team with diverse backgrounds”, including traditional finance.
“Victory Fintech submitted its [licence] application in November 2022, which was formally accepted in February 2023,” Day said. “Since then, the team has been in active communication with the regulator, working through the core areas of the thorough application process for a complex business.”
Other VDX management includes Adam Zhou, who lists himself as a co-founder and chief commercial officer on LinkedIn, and Andrew Davidson, the chief technology officer who previously worked at HSBC and OSL.
Additional reporting by Xinmei Shen.
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