The Securities and Futures Commission (SFC) of Hong Kong has instituted a new regulation mandating a minimum insurance threshold for licensed cryptocurrency exchanges within the jurisdiction. As per this requirement, these exchanges must ensure a minimum of 50% coverage for their customers’ assets.
Recent disclosures from Coin Telegraph highlight that OSL Exchange, a licensed exchange based in Hong Kong, announced last week its compliance with this mandate by procuring a policy that extends coverage to 95% of its users’ assets. This insurance policy, backed by Canopius, a syndicate of Lloyd’s of London, is the outcome of a two-year partnership agreement.
In a parallel development, HashKey Exchange, another licensed virtual asset trading platform operating in Hong Kong, has finalized an insurance agreement with OneInfinity on November 16. The scope of this policy spans from $50 million to $400 million in user assets and has the potential to encompass incidents related to server downtime, data backup, and load management.
The move comes subsequent to Hong Kong’s decision to extend cryptocurrency trading access to retail investors in August of the preceding year. Presently, OSL and HashKey stand as the solitary exchanges possessing virtual asset trading licenses. Concurrently, 13 other entities are in the process of applying for similar licenses, subject to rigorous due diligence procedures. These evaluations entail conventional financial audits, surpassing the scrutiny of mere proof-of-reserves assessments.
Despite the nominal application fees for licenses, amounting to a few hundred dollars, reports indicate that Web3 firms are investing substantially, up to $25 million, in their application endeavors. These expenditures predominantly cater to product development and team augmentation, notably for traditional financial entities transitioning into the cryptocurrency domain.
