The Hong Kong Securities and Futures Commission (SFC) has established a minimum insurance requirement for licensed cryptocurrency exchanges operating within the region, stipulating that these exchanges must insure at least 50% of their customers' assets.
According to a report from Coin Telegraph, OSL Exchange, a licensed exchange in Hong Kong, revealed last week that it had exceeded this requirement by securing a policy that covers 95% of its users' assets. This policy is underwritten by Canopius, a syndicate of Lloyd’s of London, and is part of a two-year partnership.
In a similar move, HashKey Exchange, another licensed virtual asset trading platform in Hong Kong, entered into an insurance agreement with OneInfinity on Nov. 16. This policy, which currently covers a range of $50 million to $400 million in user assets, has the potential to extend to incidents involving server downtime, data backup, and load management.
Following Hong Kong's decision to open cryptocurrency trading to retail investors in August of the previous year, OSL and HashKey are currently the only exchanges with virtual asset trading licenses. There are 13 other entities applying for similar licenses, all of which are required to undergo extensive due diligence checks. These checks include traditional financial audits, which are more comprehensive than proof-of-reserves.
Despite the relatively low cost of license application fees, which amount to only a few hundred dollars, Web3 firms are reportedly spending up to $25 million on their applications. These expenses are primarily for product development and team building, particularly for traditional financial entities that are new to the cryptocurrency sector.
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