Bybit’s VATP Application License in HK Is Now Withdrawn With Legal Challenges

Key Points:

• Bybit’s VATP application license in Hong Kong was withdrawn on May 31 following SFC scrutiny.
• Hong Kong’s new regulations led to seven exchanges exiting the licensing process recently amid rumors of no offshore licenses being issued soon.

On May 31, Bybit, one of the top three cryptocurrency exchanges globally by trading volume with 30 million users, withdrew its application for a virtual asset trading platform (VATP) license from Hong Kong’s Securities and Futures Commission (SFC).

Bybit’s VATP Application License Hong Kong Withdraws Amid Regulatory Pressure

The withdrawal of Bybit’s VATP application comes after the SFC previously issued warnings to investors, labeling Bybit as an unregistered exchange. In March, SFC also Bybit and MEXC to its warning list for promoting trading services to Hong Kong residents without proper licensing. The scrutiny follows similar warnings issued by Japanese and German authorities last year.

Established in 2018, Bybit is famous for its ultra-fast matching engine, catering to professional crypto investors and traders.

Under new regulations, effective June 2023, all VATP operators in Hong Kong were required to apply for an SFC license by February 29. Those failing to comply were mandated to cease local operations by May 31. In light of these regulations, market rumors suggest that Hong Kong may not issue licenses to offshore exchanges in the near future. Consequently, seven exchanges have exited the licensing process within the past two months.

Despite the regulatory tightening, Hong Kong remains a vibrant hub for digital assets. The recent approval of spot Bitcoin and Ethereum ETFs underscores the country’s progressive stance on trading and technology innovations. However, the region’s shift away from serving as a proxy to China may impact its attractiveness to investors.

Bybit Faces Internal Turmoil Over Notcoin Airdrop Mishap

Following Bybit’s VATP application, the exchange has also faced internal challenges. Several CEOs resigned following issues with the Notcoin (NOT) airdrop, which forced the exchange to compensate 320,000 users with $26 million.

The airdrop mishap occurred on May 16 when users experienced delays in depositing Notcoins, resulting in losses as they were unable to sell immediately. The exchange processed 370,000 on-chain transactions, with 70% of deposits recorded before NOT trading pairs were opened.