BC Technology denies it is selling OSL crypto exchange as stock plummets amid challenges for Hong Kong licensing

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Hong Kong-based BC Technology Group refuted a report that it was exploring a sale of its locally licensed digital asset business OSL for as much as HK$1 billion (US$137.3 million) after its stock shed a fifth of its value on Tuesday. Bloomberg News reported on Monday that the investment holding company, which listed on the Hong Kong stock exchange in 2012, was gauging interest from buyers for the sale of OSL, one of only two licensed cryptocurrency exchanges in the city along with HashKey. BC Technology might opt to just sell off parts of the business, according to Bloomberg, citing unnamed sources. BC Technology’s shares fell the next day by more than 22 per cent to HK$3.35. “The Board wishes to clarify that the contents and statements in the article are factually inaccurate and highly misleading,” BC Technology said in a filing to the Hong Kong stock exchange. Since Hong Kong announced a year ago its intent to transform the city into a virtual asset hub, expectations for the local crypto market have been heightened, attracting attention from a slew of exchanges seeking a now-required licence after new rules went into effect in June. More recently, the challenges of bringing crypto business back to the city have become more apparent. OSL was Hong Kong’s first crypto exchange licensed by the Securities and Futures Commission (SFC) in 2020 under a previous voluntary scheme, allowing it to serve professional investors only. The new licensing requirement supersedes that and allows exchanges to sell cryptocurrencies with large market capitalisations such as bitcoin and ether to retail investors. OSL and HashKey both had their licences upgraded this year to be able to serve retail investors under the new policy. Only five local exchanges have so far applied for the new virtual asset trading platform (VATP) licence, which was introduced to bring stability to the market and instil confidence in investors. Meex Digital Securities became the fifth applicant last week. The other four licence applicants are Hong Kong Virtual Asset Exchange, Hong Kong Digital Asset Exchange, Hong Kong BGE and Victory Fintech. The SFC introduced a list of current applicants after a recent financial scandal involving the JPEX crypto exchange marred the city’s efforts to build up the local industry. The allegedly fraudulent exchange was the subject of more than 2,500 complaints tied to the loss of around HK$1.5 billion. Several companies that have not yet formally applied, but have ties to Hong Kong and mainland China, have announced their intent to pursue a licence. Hong Kong’s embrace of virtual assets is seen by some as a way for Chinese firms to facilitate crypto trading while it is still strictly banned on the mainland. Exchanges with ties to two Chinese securities brokers, which were warned in December about giving investors access to global equities, are also pursuing VATP licences, Nikkei Asia reported on Monday. Yax, which was incubated by Beijing-based Tiger Brokers, confirmed that it is “in the very early stage of exploration”. “We are closely observing regulatory and policy requirements, ensuring constant compliance with the laws and regulations of Hong Kong,” a company representative said. PantherTrade, with apparent ties to Shenzhen-based Futu Holdings, is the other exchange identified by Nikkei. The listed director for PantherTrade Holdings in Hong Kong shares a name with a Futu Securities human resources manager, LinkedIn shows. Still, the high costs of compliance in Hong Kong remain a barrier to unseating markets like Singapore as the go-to base of operations for crypto business. One person familiar with the process estimated that it could cost a company about HK$60 million from beginning to end. The current applicants are made up of platforms that focus primarily on professional services. In a statement to the Post last week, an OSL spokeswoman said “retail access to trading services on regulated platforms in Hong Kong is still in its early days”. “However, we have seen increasing client interest in OSL’s services following the enforcement actions taken against unlicensed and unlawful players in Hong Kong in recent weeks,” she added. According to BC Technology’s mid-year report, the company suffered a net loss of HK$94.7 million in the first half of 2023, compared with losses of HK$312.1 million during the same period a year ago. OSL is the main source of income for the company, according to the report. Additional reporting by Ben Jiang

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