BC Technology denies it is selling OSL crypto exchange as stock plummets amid challenges for Hong Kong licensing

BC Technology Group, a Hong Kong-based company, has denied a report that it was considering selling its locally licensed digital asset business, OSL. This denial came after its stock lost a fifth of its value. Bloomberg News had reported that the investment holding company, which was listed on the Hong Kong stock exchange in 2012, was gauging interest from potential buyers for the sale of OSL. OSL is one of only two licensed cryptocurrency exchanges in the city, the other being HashKey. According to Bloomberg, BC Technology might choose to sell off parts of the business. The company's shares fell by more than 22 per cent the following day. BC Technology refuted the contents and statements in the article, calling them factually inaccurate and highly misleading. A year ago, Hong Kong announced its intention to transform the city into a virtual asset hub. This announcement heightened expectations for the local crypto market and attracted attention from numerous exchanges seeking a now-required license. However, the challenges of reintroducing crypto business to the city have become more apparent. OSL was Hong Kong's first crypto exchange licensed by the Securities and Futures Commission (SFC) in 2020 under a previous voluntary scheme, which allowed it to serve professional investors only. The new licensing requirement supersedes that and permits exchanges to sell cryptocurrencies with large market capitalisations such as bitcoin and ether to retail investors. OSL and HashKey both had their licenses upgraded this year to serve retail investors under the new policy. Only five local exchanges have so far applied for the new virtual asset trading platform (VATP) license, which was introduced to bring stability to the market and instil confidence in investors. The SFC introduced a list of current applicants after a recent financial scandal involving the JPEX crypto exchange marred the city's efforts to build up the local industry. The allegedly fraudulent exchange was the subject of more than 2,500 complaints tied to the loss of around HK$1. 5 billion. Several companies that have not yet formally applied, but have ties to Hong Kong and mainland China, have announced their intent to pursue a license. Hong Kong's embrace of virtual assets is seen by some as a way for Chinese firms to facilitate crypto trading while it is still strictly banned on the mainland. Exchanges with ties to two Chinese securities brokers, which were warned in December about giving investors access to global equities, are also pursuing VATP licenses. Yax, which was incubated by Beijing-based Tiger Brokers, confirmed that it is in the very early stage of exploration. PantherTrade, with apparent ties to Shenzhen-based Futu Holdings, is the other exchange identified by Nikkei. The high costs of compliance in Hong Kong remain a barrier to unseating markets like Singapore as the go-to base of operations for crypto business. One person familiar with the process estimated that it could cost a company about HK$60 million from beginning to end. The current applicants are made up of platforms that focus primarily on professional services. According to BC Technology's mid-year report, the company suffered a net loss of HK$94. 7 million in the first half of 2023, compared with losses of HK$312. 1 million during the same period a year ago. OSL is the main source of income for the company.