Elliptic says Hong Kong's SFC licensing framework has made the territory a leading hub for institutional crypto capital, with two licensed exchanges and a dozen applicants in the queue.
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Hong Kong has pulled ahead of other Asian centers in attracting institutional crypto capital, blockchain analytics firm Elliptic said in a report. The territory's SFC licensing framework now gives banks and asset managers a clear path to trade digital assets without legal ambiguity, the firm said.
The shift shows in the applicant pipeline. Since the Securities and Futures Commission opened its compulsory licensing regime in June 2023, the number of licensed exchanges has grown from zero to two – HashKey Exchange and OSL. Roughly a dozen more applicants are in the queue, including HKVAEX and PantherTrade. The one-year transitional period ended Feb. 29, forcing platforms that failed to apply by the deadline to face closure orders.
Elliptic analysts pointed to structural features behind Hong Kong's appeal. The SFC requires licensed exchanges to hold client assets in trust accounts and lets them serve both retail and professional investors, Elliptic said. Hong Kong courts have also treated crypto assets as property capable of being held on trust, a common-law foundation that reduces legal uncertainty around ownership.
Other hubs are competing for the same business. Singapore's Monetary Authority has granted fewer than a dozen crypto-related licenses since 2020 under its Payment Services Act. Dubai's Virtual Assets Regulatory Authority has licensed more than 20 firms, though questions remain about enforcement, Elliptic said. Japan has a mature licensing system. Its leverage caps and tax rates push some traders elsewhere.
The result is a concentration of institutional order flow. Licensed Hong Kong exchanges now handle a meaningful share of the region's spot trading in Bitcoin and Ether. HashKey Exchange reported cumulative trading volume of HK$576 billion, about $74 billion, through the end of 2023, and that figure has grown since.
A risk remains, Elliptic said. Licensed exchanges can list only tokens that pass the SFC's eligibility criteria. For retail clients, that currently covers just Bitcoin and Ether. Institutional demand for Solana or other altcoins flows through OTC desks or offshore venues outside SFC oversight. The regime keeps the casino out of the formal system. It does not eliminate it.
The next test comes as Hong Kong pushes forward with a stablecoin sandbox. The Hong Kong Monetary Authority launched the sandbox in March with a handful of participants including Standard Chartered-backed SC Ventures and RD InnoTech. Elliptic noted that if the trials produce viable settlement tokens, the territory could reduce its reliance on USDC or USDT for on-chain transactions, closing a gap in its infrastructure.
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