The Securities and Futures Commission (SFC) of Hong Kong has issued a warning regarding the illegal activities of crypto exchange MEXC, which does not comply with current Hong Kong crypto regulations and operates without a license.

In a Friday press release, the SFC stated that MEXC has been actively promoting its services to investors in Hong Kong, despite not having obtained a license from the SFC or even applying for one.

According to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, it is a criminal offense to conduct business as a virtual asset service provider, such as operating a virtual asset exchange, in Hong Kong without the necessary license. 

The regulator added that marketing such services to Hong Kong investors without proper authorization is also prohibited. 

SFC Adds MEXC to Alert List

In response to MEXC’s unlicensed operation, the SFC has added the platform and its website to the Suspicious Virtual Asset Trading Platforms Alert List. 

The regulator also highlighted the risks associated with trading virtual assets on an unregulated platform. 

“Once again, the SFC cautions investors against trading virtual assets on an unregulated VATP,” it wrote. 

“Investors may risk losing their entire investment held on the platform if it ceases operation, collapses, is hacked or otherwise suffers from any misappropriation of assets.”

The SFC said investors can refer to its list of licensed virtual asset trading platforms to verify the licensing status of a VATP.

Notably, this is not the first time MEXC has encountered regulatory issues. 

In April of last year, Japan’s Financial Services Agency revealed that MEXC had been operating in the country without proper registration. 

Furthermore, Germany’s Federal Financial Supervisory Authority also flagged MEXC for operating without authorization as recently as October.

The consumer alert comes after the SFC issued another warning earlier this week regarding the crypto exchange Bybit. 

Hong Kong Pushes for Crypto Regulations

Hong Kong is actively working to establish a robust regulatory framework for the cryptocurrency industry. 

Last year, the SFC initiated consultations on regulatory rules for the sector. 

In March, the city-state’s Virtual Asset Service Providers licensing regime came into effect, requiring crypto exchanges to register with the regulator. 

On February 29, the deadline for virtual asset trading platform (VATP) crypto license applications in Hong Kong passed, with the number of applicants reaching 24.

Major crypto exchanges with ties to mainland China or Hong Kong, including industry giants, have either applied for licenses directly or through their affiliates. 

HBGL Hong Kong, an affiliate of HTX (formerly Huobi Global), submitted an application twice for its Huobi HK platform, while HKVAEX, an affiliate of Binance, applied in April. 

OKX, another prominent exchange founded in China, submitted its application back in November, in order to comply with hong Kong crypto regulations. 

Currently, OSL and HashKey are the only licensed exchanges serving retail investors.

Cryptocurrency exchanges that have not yet applied must exit the Hong Kong market by May 31.

The Securities and Futures Commission (SFC) will announce approved and declined applications on a public register by June 1, 2024.

After securing approval, virtual asset trading platforms can onboard new retail and institutional crypto investors and start marketing in Hong Kong.

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