Finally, a digital asset license was issued. Hong Kong took a historic step and the first licensed digital asset exchange was born.

Source: Gelonghui

On December 15, OSL Digital Asset Platform announced that it had obtained the first digital asset license issued by the Hong Kong Securities and Futures Commission, namely License No. 1 (Securities Trading) and License No. 7 (Providing Automated Trading Services). OSL Digital Asset Platform is a subsidiary of BC Technology Group (863.HK), a Hong Kong-listed company, and is also the largest digital asset platform in Asia.

This is an important milestone in the regulation of the virtual asset market in Hong Kong, and it has extraordinary significance for the Asia-Pacific region. The Hong Kong Securities and Futures Commission has also further demonstrated its determination and ability to regulate the digital asset industry. As early as June 2019, the multinational Financial Action Task Force stated in its recommendations that all 39 member jurisdictions will adopt a similar regulatory model as Hong Kong. What is so special about Hong Kong's virtual asset regulatory framework?

1. “Unique” Hong Kong Digital Asset License

The COVID-19 pandemic has spread around the world, and the real economy has fallen into a downturn. However, digital assets such as Bitcoin have seen strong growth in 2020, becoming the best performing investment tool in 2020, far exceeding traditional financial instruments such as gold and crude oil. Bitcoin's performance is attracting more and more investors.

More and more investors are beginning to allocate digital assets. In order to protect the safety of investors' assets and promote the orderly development of the digital asset market, some countries and regions have issued relevant digital asset trading licenses. Currently, countries that have issued different relevant licenses to various digital asset exchanges include Japan, the United States, Switzerland, Thailand, Canada, the Philippines, etc.

The license approved by the Hong Kong Securities and Futures Commission this time is not only different from the above licenses, but also has more far-reaching significance.

OSL has obtained the virtual asset Category 1 and Category 7 regulated activity licenses approved by the Hong Kong Securities and Futures Commission. In the traditional regulatory framework, a Category 1 (Securities Trading) license refers to the qualification to engage in securities trading, that is, buying and selling bonds for clients; allocating and underwriting securities for clients to buy and sell mutual funds and unit trust funds; and providing stock and stock options trading brokerage services for clients. A Category 7 (Providing Automated Trading Services) license is an electronic trading platform qualification that provides automated trading service operations and matches client buy and sell orders.

This means that Hong Kong's digital asset license is not a new law or regulation, but rather the use of existing financial regulatory tools under current laws and adjustments to suit digital asset industry participants who wish to be regulated. This not only ensures that institutional and professional investors enjoy investor protection mechanisms in the traditional financial system, but also introduces industry-specific protection mechanisms for new asset classes such as Bitcoin.

Traditional financial institutions and professional investors have long coveted the digital asset pie, but have been suffering from the lack of compliance channels and safety guidelines for participation. The Hong Kong Securities and Futures Commission has solved this problem in a very innovative way. In fact, Hong Kong has long seen the huge potential of the digital asset industry and has begun exploring digital asset licenses very early.

On November 1, 2018, the Hong Kong Securities and Futures Commission announced that it plans to experiment with regulating related platforms in a sandbox program for digital currency exchanges. If the experiment is successful, it will issue licenses to cryptocurrency exchanges.
On November 6, 2019, the Hong Kong Securities and Futures Commission issued a "Warning on Virtual Asset Futures Contracts" and a "Position Paper: Regulating Virtual Asset Trading Platforms", stating that it will approve and issue licenses to entities that engage in regulated activities as defined in the Securities and Futures Ordinance, including virtual asset trading platforms that provide security token services.
On August 21, 2020, the Hong Kong Securities and Futures Commission approved in principle the virtual asset license application of OSL Digital Asset Platform, a subsidiary of BC Technology Group.
On November 3, 2020, the Hong Kong Securities and Futures Commission revealed that it would launch a mandatory licensing system for non-securities virtual asset trading platforms to regulate all applicable virtual asset platforms. Ashley Alder, CEO of the Securities and Futures Commission, said that after the launch of the licensing system, all virtual asset platforms operating in Hong Kong or targeting Hong Kong investors must apply for a license and be regulated by the authorities.

After the license is issued, Hong Kong is expected to become the first fully regulated virtual asset trading market. In this wave of digital assets, Hong Kong can further consolidate its position as a global financial center. And the first licensed platform OSL may become the biggest beneficiary.

2. The license was officially approved, and OSL's business entered the fast lane

According to a digital asset exchange risk report, among the 216 digital asset exchanges surveyed and analyzed, only 14% of the exchanges confirmed that they had obtained legal licenses issued by relevant regulatory authorities. Digital asset licenses have become one of the "moats" of digital asset trading platforms.

Last year, the Hong Kong Securities and Futures Commission stated that it “does not regulate Bitcoin, but only regulates platforms that trade security tokens; Bitcoin and other common cryptocurrencies are not securities.” However, this year, Ashley Alder, CEO of the Hong Kong Securities and Futures Commission, revealed that a new regulatory policy will be introduced - all platforms involved in trading digital assets (even if the asset is not a security, such as Bitcoin) must operate under the supervision of a new licensing framework. Service providers who operate in Hong Kong or provide services to Hong Kong investors must be licensed to operate digital asset businesses.

This means that OSL has become the only fully compliant digital asset platform in Hong Kong. According to the announcement released by BC Group, OSL's main businesses include digital asset trading brokerage, exchange, custody and software and services (SaaS).

As the appeal of virtual assets such as Bitcoin grows day by day, traditional large financial institutions are also making arrangements. Large financial institutions such as JPMorgan Chase, PayPal, Grayscale Asset, State Street, Standard Chartered, Fidelity, Deutsche Börse Group, Nomura and ING have all shown interest in Bitcoin and believe that it is necessary to allocate Bitcoin. OSL's compliance and convenience have certainly become the best choice for these financial institutions, which has undoubtedly become a powerful booster for the growth of OSL's brokerage business.

OSL's SaaS business can create a full set of customized SaaS products for financial institutions, providing various services such as digital asset custody and exchange. The OSL SaaS suite currently serves more than 10 active institutional clients. As digital assets and traditional financial assets gradually merge, it is expected that more traditional financial institutions will engage in digital asset business, and OSL will have broad room for development.

Another area with greater potential is the STO business. The issuance of security tokens is also called "STO" (Securities Tokens Offering), which refers to real assets that can be confirmed and "fragmented" on the blockchain. Take gold as an example. Today, the total market value of gold is 9.5 trillion. Even if 1% is tokenized, the gold token market will have 95 billion US dollars. Not to mention the traditional real estate market. With the issuance of the license, Hong Kong is expected to become the world's first fully regulated STO trading market, and OSL will also benefit from the first-mover advantage and seize the early market share.

OSL's prospects are exciting and worthy of investors' attention.

Conclusion

The CEO of the Hong Kong Securities and Futures Commission stated: The trend of crypto assets will continue. The rise of digital assets is an indisputable fact.

As the first licensed digital asset trading platform, OSL is expected to become the leader of this wave of digital assets.