The Securities and Futures Commission (SFC) of Hong Kong has identified “unsatisfactory practices” at several cryptocurrency exchanges seeking full licenses after conducting on-site inspections, according to a report from Bloomberg. Sources familiar with the matter indicated that some exchanges rely too heavily on a small group of executives to manage client asset custody, while others lack adequate safeguards against cybercrime risks.

An SFC spokesperson confirmed that inspections had been conducted, though they are ongoing and subject to change. The SFC also noted that platforms unable to address “critical deficiencies” found during inspections could lose their provisional licensing status or have their license applications rejected. However, the SFC did not disclose which exchanges were found to have these deficiencies.

Among the 11 entities applying for a full license with the SFC are Crypto.com, HKbitEX, PantherTrade, and Bullish. None of these applicants immediately responded to CoinDesk’s requests for comment. Notably, Bullish owns CoinDesk. Earlier this year, the SFC began conducting these inspections as part of its licensing process, which prompted 12 entities, including OKX and Bybit, to withdraw their applications. Currently, OSL and HashKey are the only fully licensed crypto exchanges in Hong Kong.

This development could pose a challenge to Hong Kong’s ambitions to become a global cryptocurrency hub, a goal it has been pursuing by approving spot-crypto products earlier this year.

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Source: coindesk.com

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