Hong Kong securities watchdog places major crypto exchange Bybit on alert list as local unit seeks licence in the city

A number of Bybit’s cryptocurrency investment products have been offered to Hong Kong investors even though no entity within the group is licensed to operate in the city, according to the SFC’s statement on Thursday. It said the exchange was under scrutiny for offering suspicious virtual-asset trading products.

The SFC pointed out that those trading on an unlicensed platform “risk losing their entire investment” if the entity “ceases operation, collapses or otherwise suffers from any misappropriation of assets”.

“Seeking recourse against entities that do not have a nexus with Hong Kong is likely to be difficult and legal remedies may not be available,” the regulator said.

Bybit said it is unable to comment on any specific product or regulatory inquiry, according to an emailed statement to the South China Morning Post on Friday.

The company said it “maintains a close dialogue” with regulators around the world, including Hong Kong, and “strives to comply with all applicable regulations”.

It also lists different products for various regions to meet local compliance requirements. “You can be confident that [certain] products are not available in the Hong Kong market,” the company said.

The SFC’s latest warning reflects Hong Kong’s efforts to ensure that local cryptocurrency activities adhere strictly to existing virtual-asset regulation.

Hong Kong securities watchdog puts virtual asset trading platforms on fraud alert

In its statement on Thursday, the SFC said the Hong Kong entity of Bybit, Spark Fintech Limited, was not involved in providing services related to the crypto products that the regulator has warned against.

Spark Fintech filed its application for a virtual-asset trading platform licence to the SFC on January 31, according to the regulator’s website. It is one of the largest crypto exchanges among 24 licence applicants in Hong Kong.

Being placed on the SFC’s alert list, however, could complicate the efforts of Bybit’s local unit to get licensed in the city.

Hong Kong joins many governments in beefing up crypto rules: report

A key factor that the SFC takes into consideration in the licensing process is whether the applicant follows all relevant laws and regulations, and “the strength of its compliance programme and track record”, said Andrew Fei, a partner at law firm King & Wood Mallesons in Hong Kong.

“Generally, being associated with a company that’s named in an SFC public warning is probably not ideal,” Fei said.

It is also the fourth-largest exchange by monthly visits, CoinGecko said, citing data from SimilarWeb.

As Hong Kong moves ahead with a mandatory licensing regime for centralised crypto exchanges, Bybit in May last year launched a separate platform just for users based in Hong Kong.

Its main global platform displays a pop-up message for users with a Hong Kong internet protocol address, saying that the city’s residents can only use its local platform.