Hong Kong is flooded with OTC crypto stores

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In Hong Kong, brick-and-mortar crypto exchanges are prevalent, but there are concerns about unknown laws that might completely dismantle these businesses.

Hong Kong, being one of the world’s most important and influential financial cities, has played a vital role in the development of cryptocurrencies. For example, the Chinese territory has given birth to some of the most well-known and successful crypto enterprises to date, such as FTX, a crypto derivatives exchange, and Crypto.com, a digital asset platform.

Despite the fact that Hong Kong’s crypto exchanges handle trillions of dollars on a daily basis, the “Vertical City” also has a plethora of actual over-the-counter crypto businesses. According to Henri Arslanian, a PwC crypto lead and former chairman of the Hong Kong Fintech Association, the number of conventional OTC crypto brokers in Hong Kong stands out. He explained, “These are truly physical and mortar establishments for the general population.”

Furthermore, an unnamed source informed Cointelegraph that when driving about Hong Kong, he couldn’t help but notice a significant increase of OTC crypto exchanges, some of which even offer access to cryptocurrency ATMs.

Hong Kong’s crypto culture is made up of OTC retail outlets

Compared to areas such as the United States or Europe, where buying and selling cryptocurrency on regulated exchanges is relatively simple, Hong Kong’s actual crypto stores are a distinctive brand that gives people another method to acquire bitcoin.

Kelvin Yeung, the CEO and founder of the Hong Kong Digital Asset Exchange, or HKD.com, provided some insight into the situation. According to Yeung, the HKD.com crypto exchange was launched in 2019, the actual shop opened in January of this year, and the company employs over 30 people to provide customer care.

HKD.com’s shop, according to Yeung, functions similarly to a typical bank, allowing consumers to have a hands-on approach to buying cryptocurrency as well as access to in-person advisory services. When a result, he predicts that as crypto becomes more widespread, retail outlets will become a global trend:

“As more investors and institutional investors get into the industry and digital currency becomes mainstream, there will be a tendency to open physical stores in combination with online platforms.”


Because of its physical presence, Yeung feels that stronger consumer trust is developed between HKD.com and its user base. “The majority of our consumers are between the ages of 40 and 70. “An older client base is critical for widespread acceptance since many of these people still use fiat cash and only trust traditional banking institutions,” he explained.

It’s worth noting that these physical sites aren’t simply for the elder age. Coiner HK, a Hong Kong OTC retail exchange, was founded by Priscilla Ng at the beginning of 2020 to focus on the female market: “We decided to develop a market for women because we want to promote the concept that women can be financially independent and practice self-investment”.

As a result, Ng said that CoinerHK’s clients are mostly women between the ages of 20 and 50, with roughly 70% of them selling cash for cryptocurrency. Ng also mentioned that CoinerHK has two physical sites in Hong Kong’s golden district.

“We treat them as friends while dealing and also offer our clients trust in us since we possess physical stores,” Ng said, echoing Yeung. Ng also mentioned that CoinerHK’s Wanchai site doubles as an art gallery, displaying nonfungible tokens (NFTs).

Physical OTC exchanges may be pushed away by regulations

While physical OTC crypto exchanges like HKD.com and CoinerHK look to be increasing access to crypto in Hong Kong, these types of businesses come with a variety of regulatory hazards.

For example, Arslanian stated that some establishments have targeted mainland Chinese visitors in addition to regular consumers. “One could assume that if mainland Chinese tourists visit Hong Kong, nothing will stop them from buying crypto at these OTC shops,” he said. Many of these shops are located in touristic areas to attract users, but they are especially appealing to Chinese tourists due to the crypto ban in China: “One could assume that if mainland Chinese tourists visit Hong Kong, nothing will stop them from buying crypto at these OTC shops.”

With this in mind, Arslanian believes that the inflow of Chinese tourists interested in buying cryptocurrency would lead to an expansion of retail OTC centers in Hong Kong. Arslanian, on the other hand, believes that Hong Kong’s planned legal framework for crypto exchanges would force these businesses to go down completely.

Hong Kong’s Financial Services and Treasury Bureau are contemplating limiting cryptocurrency access to portfolios with at least $1 million in assets. The proposed regulations, if implemented, would limit crypto access to around 93 percent of the city’s population.

Despite the fact that this is a significant barrier for physical OTC stores, Arslanian said that OTC retailers may simply relocate their operations underground. However, he warned that this would put customers at risk: “In the event that something goes wrong, the public is less inclined to disclose it to the authorities.”

In terms of ambiguous legislation, Yeung stated that the biggest problem for HKD.com right now is determining whether Hong Kong would soon only allow institutional investors to buy in cryptocurrency: “This will have a significant impact on our company.” The crypto community is very opposed to registered crypto exchanges being unable to serve retail clients, according to Arslanian, because this may lead to users going to unregulated sites.

Unfortunately, even if actual OTC stores attempted to be properly regulated, Arslanian pointed out that obtaining the appropriate permits would be incredibly difficult. To buy and sell crypto on HKD.com, all that is required for now, according to Yeung, is a valid ID and address verification.

It’s worth noting that OSL, which is part of the Fidelity-backed BC group, is now Hong Kong’s sole regulated crypto exchange. Andrew Walton, the managing director and head of exchange at OSL, told Cointelegraph that the exchange was designed with regulations in mind, and that it even practiced self-regulation before some of the current rules were created.

Walton also revealed that OSL was grandfathered in under Singapore’s Payment Services Act, or PSA, and that it has filed to the Monetary Authority of Singapore for a digital payment token, or DPT, license. OSL was recently able to extend its company into Latin America thanks to impressive regulatory clearances. “The OSL Exchange product will be offered to institutional and professional investors throughout Latin America, starting with Mexico, Colombia, and Argentina.” “As legislative developments across the area take place, OSL’s LatAm service will seek proper license,” Walton noted.

From a business standpoint, retail investors are required

While OSL’s efforts are commendable, Arslanian pointed out that a large portion of money is earned by retail clients buying and selling crypto on exchanges, which draws institutional clients. As a result, he believes Hong Kong’s desire to restrict crypto exchanges to cater primarily to institutional investors is a difficult ask. Although this may be true, Walton stated that over the last year, OSL has witnessed a considerable rise in institutional interest.

Given the ongoing regulatory uncertainties surrounding cryptocurrencies, Arslanian said that Hong Kong would be preferable for institutional investors, while Singapore might be better for ordinary clients.

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