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Hong Kong SFC Agrees in Principle to License Fidelity Backed OSL Crypto Firm

Hong Kong’s Securities and Futures Commission (SFC) has agreed in principle to license the cryptocurrency firm OSL Digital Securities.

Hong Kong’s financial markets regulator, the SFC has agreed in principle to issue a license to OSL Digital Securities. The cryptocurrency firm is part of the Fidelity-backed BC group and was one of the first to apply for a digital asset license from the Hong Kong Securities and Futures Commission.

OSL said in November 2019, that it had applied to opt into the SFC’s regulations as announced by the regulator on Nov. 6.

SFC Opt-In Regulations

The Hong Kong Securities and Futures Commission announced the new opt-in regulations for crypto exchanges last November 2019. Financial regulators worldwide have been debating for a while just how and if they should regulate cryptocurrency or virtual assets firms.

The announcement was made by Ashley Alder, Chief Executive of the Hong Kong SFC in his speech at the Hong Kong FinTech Week 2019. Following his speech, the SFC also published a new regulatory approach to “virtual asset trading platforms,” on its website.

The approach was announced as technology-neutral—Alder said that the Hong Kong regulator had been contending with the growing list of issues, including the application of existing regulations in the “context of increased automation and the adoption of artificial intelligence and machine learning.”

The new standards set by the SFC for opt-in regulation—seek to address regulatory concerns regarding custody, know-your-client (KYC) requirements, anti-money laundering (AML), and counter-financing of terrorism (CFT) and others for trading crypto.

Licenses could be granted to the crypto exchanges that choose to include “security virtual assets or tokens for trading,” where investors will be able to differentiate between regulated platforms from those that are unregulated.

Although the SFC is open to supervising crypto exchanges, it has made clear that “the virtual assets traded on the platforms are not subject to the authorization or prospectus registration provisions that apply to traditional offerings of “securities” or “collective investment schemes.”

OSL Digital Securities are among a slew of other digital asset firms that welcome regulation as they wish to service the mainstream financial markets. So far no other crypto asset firm has been granted approval from the HK SFC.

According to Reuters, BC Group CEO Hugh Madden said that one benefit of being licensed was that regulated institutions would be able to reduce their risk by being able to engage with other regulated entities.

Hong Kong’s OSL and US-Based Abra Become the Latest Crypto Firms to Announce Layoffs

Abra, a California-based crypto trading and lending platform, and OSL, a licensed crypto exchange based in Hong Kong, are the latest in a string of crypto start-ups that have announced layoffs following the ongoing market turbulence.

Abra laid off 12 of its employees this week, and two sources familiar with the knowledge disclosed the matter.

Bill Barhydt, Abra CEO, confirmed the job cuts, stating that the company has cut 12 jobs purely as part of its cost-saving measures. The executive stated that layoffs translated to 5% of the workforce.

Barhydt said although Abra has trimmed certain jobs, the firm is still planning to hire more talents to fill various roles. While he did not mention specific job functions, he stated that an estimated 10 positions are currently open.

Meanwhile, Hong Kong-based digital asset trading platform, OSL, has slashed between 40 and 60 jobs, which is about 15% of its workforce, two individuals familiar with the source disclosed the development. The crypto exchange announced the job cuts on Wednesdays.

An OSL spokesperson confirmed the incident and said: “OSL has made the difficult decision to reduce headcount. This decision was not made lightly, and we understand the impact that this may have on employees.”

The OSL spokesperson further said the firm has adjusted its business model to renew its focus on SaaS and professional and institutional counterparts.

The spokesperson clarified that OSL made the layoffs not because it had any exposure to troubled crypto firms or tokens, including TerraUSD (UST) and staked ether (stETH).

“It is important to note that OSL has not had any exposure to stETH, luna or UST. Nor have we had exposure to any of the firms reportedly facing solvency issues,” the spokesperson said.

Abra and OSL have therefore joined several crypto firms that recently announced massive layoffs. Many crypto companies have laid off thousands of employees and frozen hiring amid challenging times for crypto and equity markets.

Last month saw more than 1,700 crypto job cuts in the crypto industry. Major crypto companies such as Gemini, Coinbase, Crypto.com, BlockFi, Mexico-based Bitso, Argentina’s Buenbit, and others, trimmed their workforces in June.

Hong Kong Crypto Exchange OSL Opens Institutions Investment in Security Tokens

OSL Digital Securities Limited (OSL), a major cryptocurrency exchange based in China, announced on Tuesday that it has become the first Type 1 SFC-licensed digital asset broker to offer sales of security tokens to professional investors in Hong Kong through private security token offerings (STOs).

According to the official statement, OSL is the first regulated digital assets brokerage firm in Hong Kong to facilitate sales of new asset-backed digital tokens classed as securities to global institutions.

OSL has been doing that for a while. So far, its institutional clients include the likes of Animoca Brands, Head & Shoulders Financial Group, China Fortune Financial Group Limited, Volmart, and Monmonkey Group Asset Management Limited.

OSL hopes to see continued growth if this is what the market demands. The firm disclosed that it offers end-to-end services for the STO transaction, acting as the bookrunner, placing agent, fiscal and paying agent, transfer agent, registrar, calculation agent, tokenisation technology partner and trading venue.

According to OSL, each digital token represents a USD10,000 unit of a Bitcoin-linked coupon-rate USD bond. The company develops the tokens using the Ethereum blockchain, has a three-month tenor and carries a fixed and a bonus coupon linked to Bitcoin performance.

In this way, investors are not only able to indirectly own digital assets pegged to traditional financial assets, but also buy the digital assets with U.S. dollars, Bitcoin and Ether, the digital token of the Ethereum blockchain.

OSL CEO Wayne Trench talked about the development: “The OSL STO transaction is a viable model for security token issuance and distribution of digital tokens by regulated operators. We designed the issuance to demonstrate the immense value and ease of distribution for a security token issued on a public blockchain. Through the STO, OSL reaffirms its position as a pioneer in the Hong Kong digital asset market. Blockchain-based digital securities represent the future of capital markets and financial products, and this is a key step in the adoption of this innovative and efficient technology.”

Through STOs (private security token offerings), OSL is playing a key central role in STO issuances and other digital asset transactions in the future. Licensed partner brokers and banks can emulate its innovative action to offer such products.

OSL Digital Securities holds a license for Type 7 (automated trading service) and Type 1 (dealing in securities) regulated activities related to digital assets from the Hong Kong Securities and Futures Commission (SFC). As a licensed broker, OSL is authorised to issue and distribute digital securities through security token offerings to professional investors.

Tokenisation Providing Opportunity for Investments

There have been increasing talks of security tokens in the cryptocurrency industry. These are digital tokens that represent tradeable securities and are regulated under securities laws. They are pegged to financial assets such as real estate, bonds, and stocks, to avoid the volatility witnessed in cryptocurrencies.

Startups with less financial experience and regulatory know-how definitely find difficulty introducing such digital assets and also hit roadblocks with regulators.

On 28th January this year, the Hong Kong Monetary Authority (HKMA) and the SFC issued a joint circular, which for the first time, allowed registered institutions and licensed firms to offer digital asset investment services through a partnership with SFC-licensed virtual asset trading platforms.

Hong Kong to Release Cryptocurrency Exchange Licensing Guidelines

The Hong Kong Securities Futures Commission (SFC) is set to release guidelines for cryptocurrency exchange licensing in May, as it moves to support trading services to retail investors from June 1. According to Bloomberg, the plans were confirmed by the SFC’s CEO, Julia Leung, who revealed that over 150 interested parties had provided feedback during the consultation process on the licensing regime.

The upcoming guidelines will likely include regulatory requirements for Anti-Money Laundering (AML) and Know Your Client (KYC) measures, among other considerations. A February 20 report by the SFC also highlighted these factors as important for regulating virtual assets.

While most prospective Virtual Asset Service Provider (VASP) licensees are still awaiting confirmation, some trading platforms have already received licenses from the SFC. Among them are OSL and Hashkey Group, according to Reuters.

However, not all trading platforms have chosen to stay in Hong Kong amid its ambitions to become a major crypto hub. Bitget, which boasts $1.4 trillion in assets in reserve, announced on April 24 that it would cease offering services to its Hong Kong customers when the VASP regime takes effect on June 1.

Despite this setback, the release of the licensing guidelines is expected to bring further clarity and regulation to the Hong Kong crypto market, while also providing a framework for legitimate trading platforms to operate under. This could help to boost investor confidence in the sector and support the city’s wider efforts to establish itself as a leading hub for digital assets and blockchain technology.

Hong Kong has already made significant strides in this area, with its Securities and Futures Commission becoming one of the first regulators to issue guidance on digital asset fund managers in November 2018. The city has also played host to a number of high-profile crypto events in recent years, including the Token2049 conference, which attracts blockchain industry leaders from around the world.

Despite this progress, however, Hong Kong still faces stiff competition from other global crypto hubs, such as Singapore and Switzerland. By introducing clear licensing guidelines and regulatory requirements for crypto trading platforms, the SFC may be able to help Hong Kong strengthen its position in this increasingly competitive field.

Hong Kong SFC Finalizes Regulatory Framework for Virtual Asset Trading Platforms

The Securities and Futures Commission (SFC) of Hong Kong concluded a consultation period today, revealing the finalized regulatory requirements for operators of virtual asset trading platforms licensed by the SFC.

Over the consultation period, the SFC collected 152 written submissions from stakeholders including industry and professional associations, professional and consultancy firms, market participants, licensed corporations, and individuals. These respondents largely welcomed the proposed measures, although several requested clarifications. Following an assessment of the feedback, the SFC made modifications and clarifications to some of the proposed requirements.

In a notable decision, the SFC has approved the proposal to allow licensed platform operators to cater to retail investors, with the majority of respondents showing agreement. To safeguard these investors, the SFC will introduce robust measures such as suitability assessments during onboarding, rigorous token due diligence, admission criteria, improved governance, and mandatory disclosures.

“Hong Kong’s comprehensive virtual assets regulatory framework adheres to the principle of ‘same business, same risks, same rules’, with a key focus on robust investor protection and risk management,” said Ms. Julia Leung, the SFC’s Chief Executive Officer. “This will foster sustainable industry development and support innovation.”

The newly released Guidelines for Virtual Asset Trading Platform Operators will come into effect from 1 June 2023, setting out key expectations such as the secure custody of assets, segregation of client assets, avoiding conflicts of interest, and complying with cybersecurity standards and requirements.

The SFC will provide further guidance on new regulatory requirements, license application procedures, and transitional arrangements. The application forms for trading platforms will be available on 25 May 2023 and the SFC will begin accepting applications on 1 June 2023.

In response to the regulations, operators are encouraged to apply for a license if they can comply with the SFC’s standards. Those unable or unwilling to comply should arrange for an orderly closure of their operations in Hong Kong.

To protect investors, the SFC will continue working with the Investor and Financial Education Council to educate the public about the risks of trading on unregulated platforms. At the time of this announcement, the SFC has not approved any virtual asset trading platform to provide services to retail investors. Most platforms currently accessible to the public are not regulated by the SFC.

The market’s response to the new regulations has been mixed, with the Hong Kong concept token CFX(Conflux) experiencing a pullback.

Currently, Hong Kong’s SFC has licensed only two virtual asset trading platforms: OSL Exchange and HashKey Pro. With the new regulatory framework set to take effect in June, this marks a significant milestone in Hong Kong’s efforts to regulate the fast-growing virtual asset sector.

Hong Kong-Based OSL Digital Securities Receives License Uplift to Enable Retail Trading of Bitcoin and Ethereum

OSL Digital Securities Limited (“OSL Digital Securities”), a wholly-owned subsidiary of BC Technology Group Limited (Stock Code: 863), has been granted an uplift to its existing license by the Securities and Futures Commission (SFC) of Hong Kong. This immediate change allows retail investors to register on its platform and trade popular cryptocurrencies Bitcoin and Ethereum.

The license uplift aligns with Hong Kong’s new regulatory rules, marking a substantial milestone not only for OSL Digital Securities and its parent company, BC Technology Group, but also for Hong Kong’s position as a forward-thinking hub for digital asset regulation.

This development is seen as a testament to the Group’s commitment to compliance, regulation, and excellence in the digital asset space. The Board of BC Technology Group views this as a significant first-mover advantage, reflecting the Group’s strategy of prioritizing regulation and compliance. It further emphasizes how regulation is the foundation of future growth and mainstream acceptance in the digital asset space.

As part of its commitment to investor protection, the Group will continue to implement stringent investor protection measures and maintain a high cold to hot storage ratio to ensure the security of client assets. This move positions OSL Digital Securities to lead the transformation of the digital asset market, setting the stage for a more robust and secure digital asset environment.

The license uplift is seen as a significant step in Hong Kong’s ambition to become a leading global hub for digital assets, allowing retail users to participate in one of the fastest-growing asset classes. It underscores Hong Kong’s progressive approach to digital asset regulation.

BC Technology Group Limited, incorporated in the Cayman Islands with limited liability, operates through its subsidiaries, including OSL Digital Securities. The company’s latest announcement was made on a voluntary basis to inform shareholders and potential investors of the latest information about the Group.

On the same day, August 3, 2023, HashKey Exchange asserted that it is the first licensed virtual asset exchange for retail users in Hong Kong. The upgrade of its Type 1 and Type 7 licenses allows the platform to expand services to retail users. Security measures include 98% of funds in cold storage, and the platform has launched a compliant OTC trading service.

HashKey Exchange has also partnered with Standard Chartered Bank and onboarded senior professionals to enhance services.

BC Technology Group Shares Drop 30%, Company Clarifies OSL Sale Rumor

BC Technology Group Limited, a leading digital asset and fintech firm listed on the Stock Exchange of Hong Kong (SEHK), issued a clarification announcement regarding unusual share price movements and misinformation circulating about the sale of its virtual asset trading platform, OSL.

On 17 October 2023, BC Technology Group observed a drastic dip in its share prices, plummeting close to HK$3, marking a daily decline of about 30%. The company swiftly responded with a public announcement stating the board had conducted reasonable inquiries concerning the abnormal price and trading volume fluctuations, finding no apparent reason for such market behavior.

A report surfaced on 16 October 2023 from Bloomberg, suggesting BC Technology Group was contemplating the sale of its cryptocurrency trading platform, OSL, with an alleged valuation of HK$1 billion (US$128 million). This news was based on anonymous insider sources claiming that potential buyers had expressed interest and that the firm might only sell part of the OSL business, not the entire operation.

The board of BC Technology Group categorically denied the allegations, labeling the Bloomberg article as “factually inaccurate and highly misleading.” They emphasized that no such considerations were being made, urging shareholders and potential investors to exercise caution when dealing in the company’s shares.

The mid-year financial report of BC Technology Group demonstrated a narrowing net loss of HK$95 million for the six months ending June 2023, significantly down from over HK$300 million during the same period in the previous year. The company highlighted that OSL’s digital asset and blockchain platform operations remain its primary revenue source, albeit with a nearly 50% reduction in digital asset trading volume on OSL to HK$112.6 billion in the first half of 2023 compared to the same timeframe in 2022.

Despite the market’s reaction, BC Technology Group maintains a transparent communication stance, dispelling rumors swiftly to uphold its market integrity. The misinformation surrounding the OSL sale, as per the board, has no basis in reality and aims to provide clarity to its stakeholders amidst turbulent market conditions.

BC Technology Group Halts Trading Amid Notifiable Transaction

The trade of BC Technology Group Limited’s shares on The Stock Exchange of Hong Kong Limited will be halted beginning at 9:00 a.m. on Monday, November 13, 2023, according to an announcement made by the company. This decision was taken in advance of a scheduled announcement about a large deal, which is regarded as business inside knowledge.

BC Technology Group Limited, with the ticker symbol 863, is an important player in the field of technology. The company was established in the Cayman Islands. Mr. Lo Ken Bon, Mr. Ko Chun Shun, Johnson, Mr. Madden Hugh Douglas, Mr. Chapman David James, and Mr. Tiu Ka Chun, Gary are the executive directors of the firm. Mr. Chau Shing Yim, Mr. David, Mr. Chia Kee Loong, Mr. Lawrence, and Mr. Tai Benedict are the independent non-executive directors.

BC Technology Group Ltd has been looking at the possibility of selling its cryptocurrency platform, OSL, which is one of the two exchanges that are licensed under the new digital asset laws that were implemented in Hong Kong in June. The prospective sale of OSL, which is estimated to be worth roughly 128 million United States dollars, is a reflection of the company’s strategic changes in response to the shifting environment of digital assets. OSL provides a variety of services, such as prime brokerage, exchange, and custody services for cryptocurrency markets, as well as infrastructure for the trading of virtual assets for use by financial institutions. In a market that is experiencing significant change, BC Technology has shown its flexibility and strategic vision by making the choice to perhaps sell sections of OSL.

The news of the trading stop and the possible sale of OSL has substantial repercussions for both the market position and the strategic path that BC Technology Group will take moving forward. The capacity of the organization to successfully traverse the challenging and continuously changing environment of the technology and cryptocurrency markets will be a critical factor in deciding its future development and stability.

UBS and OSL Pioneer Hong Kong's First Ethereum Tokenized Warrant

UBS AG’s recent announcement heralds the launch of Hong Kong’s first-ever investment-grade tokenized warrant, leveraging the Ethereum public blockchain network. This pioneering product, a call warrant with Xiaomi Corporation as the underlying asset, signifies the fusion of conventional financial mechanisms with the avant-garde blockchain technology, potentially reshaping the landscape of digital finance.

This innovative tokenized warrant, sold to OSL Digital Securities Limited, represents the first of its kind to be natively issued on a public blockchain, underscoring a significant evolution in the realm of financial derivatives. The collaboration between UBS and OSL, a subsidiary of OSL Group, emphasizes the growing synergy between traditional banking institutions and the burgeoning field of digital assets.

Winni Cheuk, Head of Sales at UBS Global Markets, APAC Public Distribution, and Patrick Pan, CEO of OSL Group, both highlighted the myriad benefits introduced by this novel product. These include enhanced transparency, reduced transaction fees, streamlined settlement processes, and extended trading hours, all facilitated by the underlying blockchain technology. The tokenized warrant utilizes smart contracts to automate and optimize trading and administrative tasks, thereby increasing efficiency and lowering operational costs.

The tokenization of financial products by UBS is not a new venture; the bank has been actively exploring and implementing blockchain solutions since 2015. In 2022, UBS issued a $50 million tokenized fixed rate note to its Asia Pacific clients through its UBS Tokenize platform, further demonstrating its commitment to digital asset innovation. The issuance of the tokenized warrant in collaboration with OSL Digital Securities marks a continuation of UBS’s endeavors to expand its digital asset capabilities and explore new avenues for financial products in the blockchain domain.

This initiative not only fortifies UBS’s standing as a leader in derivative products in Hong Kong but also signifies a major milestone in the regulated virtual asset landscape. By pioneering the issuance of an investment-grade tokenized financial product, UBS and OSL are setting a precedent for the future of financial innovation, opening up new possibilities for accessibility, efficiency, and transparency in the digital finance sector.