NewHuo, a Hong Kong-listed company controlled by Lilin, the former founder of Huobi, recently decided to withdraw its application for a cryptocurrency exchange license in both Hong Kong and Singapore.
Huobi's Former Founder Withdraws Application to Open Stock Exchange in Hong Kong
This unexpected move has sparked speculation about the profitability of compliant exchanges in these jurisdictions.
The decision to withdraw the license application indicates that NewHuo and its management are re-evaluating the potential benefits and risks of operating a compliant cryptocurrency exchange.
It is important to remember that licensing a cryptocurrency exchange involves significant regulatory compliance and financial resources.
Companies must meet stringent requirements and adhere to strict reporting and operational standards, including anti-money laundering (AML) and know-your-customer (KYC) protocols.
The perception that compliant exchanges in Hong Kong and Singapore may not be profitable can stem from several factors. First, the operational costs of maintaining a compliant exchange can be substantial.
Implementing robust security measures, conducting regular inspections and complying with ever-evolving regulations require significant investments.
Also, intense competition in the cryptocurrency market could potentially limit the profitability of exchanges, especially if they are unable to differentiate themselves or attract a significant user base.
However, it is important to remember that profitability in the cryptocurrency industry is not determined solely by compliance. Other factors such as trading volume, liquidity, market demand and product offerings also play an important role.
While compliance adds an extra layer of complexity and cost, it can also attract a more cautious and risk-averse customer base by instilling trust and trust among users.
*Not investment advice.
