The Hong Kong Securities and Futures Commission (SFC) is set to inspect the offices of cryptocurrency trading platforms seeking to operate in the area as licensed virtual asset trading platforms (VATPs).

In a May 28 announcement, the commission reminded that the “non-contravention period” for VATPs operating in Hong Kong is coming to an end on June 1. According to the regulator, those platforms that are “deemed-to-be-licensed” would have to undergo an onsite inspection.

The SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements, with a particular focus on their safeguarding of client assets and know-your-client processes.

Any of the applicants found in violation of the required compliance measures would see their licenses denied. They would also be subject to other regulatory actions as deemed necessary by the SFC.

So far, 18 entities are currently labeled as “deemed-to-be-licensed,” a temporary measure put in place until the licensing process is completed. After the June 1 deadline, any unlicensed platform offering their services would be directly breaching the anti-money laundering and counter-terrorism laws.

Further, the SFC has stressed that deemed-to-be-licensed VATP applicants are not formally licensed and, hence, cannot engage in marketing their services or onboarding retail users.

Moreover, if the SFC rejects the application of a VATP, it would have to “submit a plan” for the orderly winding down of its business in Hong Kong, with a focus on protecting client interests. At the time of publication, only two entities, namely OSL Digital Securities Limited and Hash Blockchain Limited, are listed as fully licensed VATPs.

Some applicants have already withdrawn their applications after failing to meet the Hong Kong authority’s requirements. The latest in this regard was the Hong Kong arm of a crypto exchange, which withdrew its application on May 22. Another crypto exchange also halted its services in Hong Kong after announcing its license application withdrawal on May 24.

The licensing requirements come as Hong Kong is witnessing an uptick in cryptocurrency-related scams. In March, the SFC warned of platforms impersonating the region’s two licensed platforms, OSL Digital and Hash Blockchain Limited.

For more cryptocurrency news and updates, visit Global Crypto News.

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