Hong Kong Regulator Sets 50% Insurance Requirement for Crypto Exchanges
Summary:
The Hong Kong Securities & Futures Commission has issued a mandate requiring all licensed crypto exchanges to have a minimum of 50% insurance coverage for any customer assets they manage. This was recently disclosed by OSL Exchange which also announced a partnership with Canopius for a policy covering 95% of user assets. Similarly, HashKey Exchange has secured a crypto insurance contract with OneInfinity. Despite the application fees being minimal, companies are investing up to $25 million to meet requirements, with costs primarily involving product development and team building.
The Securities & Futures Commission in Hong Kong has mandated a 50% minimum insurance coverage for all crypto exchanges with a license that manage client assets. OSL Exchange, who disclosed this information recently, has been imposed with this minimum requirement for all the assets they hold in custody. In addition, they divulged a new, two-year cooperation with Canopius, an underlying syndicate of Lloyds of London, guaranteeing an extensive policy that ensures 95% of client assets.
HashKey Exchange, another officially licensed digital asset trading hub in Hong Kong, announced a crypto insurance contract with OneInfinity dated November 16, 2023. The potential to broaden the coverage scope to involve areas such as "unanticipated server downtime, data redundancies and load distribution" is foreseen in the future. Local news sources affirm that this coverage assures the safeguarding of client assets valued between $50 million and $400 million.
Ever since retail investors gained access to crypto trading in August, the only two licensed virtual asset trading platforms have been OSL and HashKey. Currently, there are 13 companies undergoing the process to secure similar licenses. A critical part of the licensing process requires candidates to undergo rigorous due diligence examinations, inclusive of an extensive traditional financial audit. This delves deeper than just the proof-of-reserves.
The price of applying for these licenses is just a few hundred dollars. However, Web3 firms are investing up to $25 million individually to apply for them. The majority of costs incurred are associated with product development and team establishment, oftentimes starting from scratch for candidates who are conventional financial institutions without previous crypto experience.
Published At
1/29/2024 8:18:53 PM
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