(Bloomberg) -- Twenty-four companies applied for licenses to operate digital-asset exchanges in Hong Kong, including larger players like Bybit, OKX and Crypto.com, as the city tries to develop a regulated hub for the industry.

Gate.io, HTX and Bullish were among others with notable trading volumes to feature on the list. Hong Kong imposed a Feb. 29 deadline for applications and platforms that haven’t submitted must cease services by the end of May.

The world’s largest exchange Binance was absent from the list. So was Coinbase, the top US platform, and Kraken, another popular trading venue.

The crypto industry will sift through the applicants to gauge the allure of Hong Kong as a digital-asset center amid competition from other jurisdictions. The city’s nine-month-old virtual-asset rulebook prioritizes investor protection, implying compliance costs that could pose an obstacle for some businesses. 

‘Litmus Test’

“The application list is the litmus test for industry sentiment,” said Angela Ang, senior policy adviser at blockchain intelligence firm TRM Labs. “It’s a good sign to see a number of well-known players in the mix. What Hong Kong really needs is a number of committed, sizable players to anchor its ecosystem.”

The key issue going forward is to see how much companies actually invest into the Hong Kong market, Ang added.

“Like in traditional financial services, there is definitely a cost in operating a regulated business,” said Ding Chen, head of regulatory affairs at Bullish. “So we have factored that into overall strategy.” 

Hong Kong pivoted toward creating a crypto hub in late 2022, part of an effort to appear cutting-edge amid doubts about the city’s future. There are currently two authorized digital-asset exchanges, HashKey Exchange and OSL Group.

The evolving regulatory landscape will likely impact the way OSL constructs its business, and costs are something that will have to be assessed, the company’s head of regulatory affairs Gary Tiu said.

Crypto Flows

Most of the estimated $64 billion in crypto that flowed into Hong Kong in the year through June did so in over-the-counter — or OTC — trades rather than via digital-asset exchanges, according to data from Chainalysis.

Small shops dotted across the city that swap between cash and digital assets with few questions asked comprise one such OTC route. Regulators are cracking down on these outlets under a plan outlined last month.

Read more: Hong Kong Prepares Crackdown on Stealthy Crypto Purchases

Hong Kong is also working on rules for stablecoins and is open to allowing exchange-traded funds that invest directly in select cryptocurrencies. The government last month sold $750 million of digital green bonds using HSBC Holdings Plc’s tokenization platform.

(Updates with the latest number of applicants in the first paragraph.)

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