Crypto companies have increasingly become the prime targets of intensified enforcement action by financial market authorities in various jurisdictions worldwide. Centralized exchanges, lending firms and other institutions providing exposure to cryptocurrencies have especially stood out as the most affected. The majority of companies that have been found to be operating businesses in the digital assets space without proper registration or in non-compliance with stipulated requirements have either resorted to pulling out from the regional markets in question or closing shop. The new crypto-week has accentuated this narrative of regulatory clampdown retaking the spotlight.
OKX expedites expansion plans, seeks registration as digital asset provider in France
Elsewhere, OKX exchange (formerly OKEx) disclosed on Tuesday that it has filed for approval from French regulators just a month after it formally incorporated OKX France. Crypto companies looking to set up businesses as virtual asset service providers in France need to meet rigorous requirements stipulated by the French Prudential Supervision and Resolution Authority and Financial Markets Authority. OKX pointed out that the regulatory landscape in the country aligns with its interests hence the decision to make Paris a significant hub. The exchange intends to offer its products and services to the French customer base while adhering to local guidance.
“Our dedication lies in broadening our reach and involvement with European regulators, and we consider our operations in France to be crucial in this endeavor. We are looking forward to introducing French people to all the amazing projects we are working on.” Hong Fang, OKX President said.
OKX favored entry into the market due to a “concentration of crypto enthusiasts and experienced traders and the highly qualified workforce available,” which are crucial to its growth objectives. The exchange plans to hire about 100 employees as part of its plans to set up shop. French’s Minister for Digital Transition and Telecommunications, Jean-Noël Barrot, welcomed the exchange’s entry in the May 23 statement while conveying the government’s supportive stance.
“The French DASP regulation provides a clear and secure regulatory framework for digital asset service providers. Coupled with the growing number of registered DASPs in France, OKX looks forward to growing the French ecosystem in a safe and sound manner […] This application is a huge opportunity to demonstrate our commitment to support new regulatory frameworks as well as to plan for the future with MiCA coming onboard in 2024 for the entire European Union.” OKX Global Government Relations Officer Tim Byun remarked.
France has openly ingeminated its aspirations to become a trailblazer in the blockchain and Web3 niche led by President Macron and other top officials supportive of the technologies. In contrast to the landscape in the US, the French government’s policies have been drawn up to cultivate an innovative, resilient and secure sector. The government has also shown backing to efforts aimed at elevating the country’s status as a leader in the space. For OKX, the latest move complements other initiatives by the exchange which is eyeing a significant presence in other regional markets. In March, OKX said it would apply for a license to operate a virtual asset service provider in the Hong Kong jurisdiction which is preparing to usher in a new regulatory regime. Still, in the same month, OKX revealed plans to set up operations in Australia backed by a ‘huge appetite’ for crypto in the ‘indispensable and a key market.’
BitMEX launches mobile app for Hong Kong users as it implements adjustments
BitMEX, another Seychelles-based exchange, shared an update on its overseas operations on Monday, unveiling a dedicated application for its user base in Hong Kong. The crypto derivatives exchange communicated that it plans to transfer users’ accounts to HDR BMEX, its affiliated entity in the Chinese special jurisdiction. The app’s launch is part of the transitional arrangement as it will serve as the go-to avenue for users while the exchange permanently halts access to services through its website. The app will remain up as the exchange awaits its applications to be rubber-stamped. BitMEX didn’t provide an official timeline for its new mobile application but noted that it is in the testing stage and will be available soon.
BitMEX Hong Kong’s conception was motivated by the recent efforts by Hong Kong’s Securities and Futures Commission (SFC) to introduce regulatory clarity. The securities and futures markets watchdog has recently accelerated plans to adopt a clear and stable framework supporting innovation while protecting investors. Hong Kong has appealed as a viable and equally attractive option for crypto companies looking to set up overseas operations. The SFC shallowly advanced plans to introduce clear guidance for crypto companies last year in October, having previously issued an opt-in regulation of virtual asset trading platforms in 2019. Christian Hui, the Secretary for Financial Services and the Treasury in Hong Kong followed up with remarks suggesting that the amendments to the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 will be enacted in June.
Bitget applies for a regulatory license in Poland, eyes a major presence in EU
In other related headlines, Bitget exchange also revealed plans to expand its European presence by seeking entry into the Polish market. The exchange said today that it has successfully registered to operate as a VASP in the Central European country and will comply with the digital assets market’s legislations and regulatory standards. Polish crypto regulations consider corporate activities related to crypto as VAT-exempt, with profits taxed at a regular rate of 19%. Last month, the exchange announced that it had secured Lithuanian crypto registration with the latest move into Poland, marking the seventh EU jurisdiction in which it has received the green light from regulators.
“We understand that regulation is the future of the cryptocurrency industry if mainstream adoption is to be achieved […] The recent registrations in the two European countries enhance our foothold and service in Europe,” Bitget Managing Director Gracy Chen noted.
Bitget’s quarterly transparency report published last week indicated that its spot markets registered an 8% quarter-over-quarter increase in trading volume to $59 billion, while futures trading volume grew by 27% in the same period to $658 billion. The exchange also saw a 30% team growth as it made 300 new hires across the quarter, notwithstanding the prevailing crypto winter. Notably, the expansion to Poland comes two months since Bitget injected a $30 million investment into a decentralized multi-chain wallet as part of its Go Beyond Derivatives strategy. The bet made effectively made Bitget the controlling stakeholder in the merger agreement between the parties.
Hotbit suspends operations on its primary platform, citing a series of challenges
Hotbit exchange separately communicated on Monday that it was bowing out of business, giving users until June 21 to withdraw funds. The Hong Kong-based exchange, with a customer base of at least 5 million users, wrote on Twitter that it is winding down its operation, effectively ending its presence in the market it has been in for more than five years. In addition to worsening operating conditions, Hotbit cited a criminal investigation into it that saw it halt operations last August. The probe, founded on allegations of misconduct by a former manager, saw Hotbit executives subpoenaed, and some of the exchange’s funds frozen. In a formal note on its website, Hotbit justified its decision to shut down by describing the hurdles leading to the eventual decision.
“The successive collapse of large centralized institutions has led the industry to gradually in two ways: either embrace the regulation or become more decentralized. The Hotbit team believes that centralized exchanges (CEX) are becoming increasingly cumbersome, with highly complex and interconnected businesses that are difficult to comply with, whether for compliance or decentralization, and are unlikely to meet long-term trends,” the exchange wrote.
Turmoil in the space resulting from unsettling events like the collapse of the FTX in November, the depeg of USDC stablecoin in March, and intensified crackdown by regulators prompted a huge outflow of clients from centralized crypto exchange.
“Hotbit has been characterized by providing a rich variety of assets and value-added methods. Due to the industry’s uncertainty, various opportunities also contain many risks. Hotbit has also suffered repeated cyber-attacks and the exploitation of project defects by malicious users, resulting in significant losses […] The Hotbit team believes that the operation model of supporting a diverse range of assets is unsustainable from a risk management standpoint.”
Earlier this month, Bittrex US winded up its operations in the US, citing a harsh regulatory landscape, a month after the Securities and Exchange Commission filed a lawsuit against it. While the likes of Huobi and Hotbit have faced setbacks, others have taken initiatives to shield the niche from more uncertainties and enforcement action.
In March, Coinbase published a campaign titled ‘It’s time to update the system’, pushing the message that cryptocurrencies are the solution to most of the weaknesses in traditional financial systems. This month, OKX shared a similar message titled ‘The system needs a rewrite’ promoting Web 3 in collaboration with its advertising agency BBDO New York. The Seychelles-based exchange proposed transforming centralized legacy financial and digital systems by incorporating blockchain-based solutions. OKX indirectly faulted Coinbase’s approach to ‘patch up’ the broken aspects of the current system instead of calling for an entire redesign. The exchange noted that a rewrite favoring the decentralized nature of Web3 would eliminate the need for centralized players in the first place.
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