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Binance US guilty plea complicates Hong Kong affiliate’s crypto licence application

  • The crypto giant set up a separate crypto exchange in Hong Kong named HKVAEX to pursue a licence in the city, the Post reported last month
  • Hong Kong’s regulator has ‘robust requirements’ for Virtual Asset Trading Platform applicants, as well as for their substantial shareholders

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The Binance logo and a representation of cryptocurrencies are placed on a keyboard in this illustration, November 8, 2022. Photo: Reuters
Xinmei ShenandMatt Haldane

Binance and its founder Changpeng Zhao’s guilty plea to US anti-money-laundering laws may present hurdles to the cryptocurrency exchange’s plans to gain a legitimate foothold in Hong Kong, industry experts said, as Binance-backed local firm HKVAEX prepares to apply for a crypto licence in the city.

Zhao, co-founder of the world’s largest cryptocurrency exchange, on Tuesday stepped down as chief executive and pleaded guilty to breaking US anti-money-laundering laws, part of a US$4.3 billion settlement of a long-running federal investigation.

Binance also pleaded guilty to breaking US anti-money-laundering and sanctions laws, having failed to report suspicious transactions with organisations the US described as terrorist groups and with websites that sell child sexual abuse materials, authorities said.

The deal was reached as Binance faces mounting regulatory troubles in the US, which include a lawsuit brought by the Securities and Exchange Commission in June that accused the company of commingling customer funds.

Binance in recent months reportedly laid off more than 1,000 workers and saw a wave of executive departures. The company also exited several European markets and just last month sold its operations in Russia.
While more crypto firms look to Asian hubs including Hong Kong for opportunities amid tightening scrutiny of the crypto sector in the US, Binance never publicly expressed an interest in establishing a compliant presence in Hong Kong, which recently put in place a mandatory licensing regime that lets centralised exchanges accept retail investors. Observers have also pointed out the many challenges Binance would face in acquiring a licence in Hong Kong given its troubles elsewhere.

The crypto giant, however, has set up a separate crypto exchange in Hong Kong named HKVAEX to pursue a licence in the city, the South China Morning Post reported last month. While HKVAEX operates separately with its own executives, the two companies share resources, sources told the Post.

The HKVAEX and Binance logos. Photo: Handout
The HKVAEX and Binance logos. Photo: Handout
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