Hong Kong-based BC Technology Group Ltd. is reportedly in the early stages of considering the sale of its crypto exchange platform OSL. OSL is one of only two exchanges in Hong Kong licensed under the digital-asset rules introduced by the city in June.

Potential Sale of OSL at HK$1 Billion Valuation

BC Technology, Standard Chartered’s partner in Zodia Markets, has been testing the waters, reaching out to potential buyers, including industry players and investment funds. The proposed valuation is approximately HK$1 billion ($128 million), according to sources familiar with the matter.

OSL offers prime brokerage, exchange, and custody services for the crypto market, along with infrastructure for financial institutions to engage in virtual-asset trading.

Possibility of Partial Sale

The consideration extends to the possibility of selling parts of OSL rather than the entire business. However, the report emphasises that BC's deliberations are ongoing, and there is no guarantee that a deal will come to pass.

Hong Kong's Regulatory Environment

This development unfolds in the context of Hong Kong's efforts to position itself as a hub for the digital asset sector.

New digital-asset regulations were introduced on June 1, enabling retail investors to trade larger tokens on licensed exchanges. Despite regulatory efforts, demand for cryptocurrencies in Hong Kong has been lacklustre, partly attributed to last year's market turbulence and subsequent business failures.

Financial Snapshot of BC Technology

BC Technology's interim report shows a reduction in net losses, narrowing from HK$300 million to HK$95 million in the six months ended in June.

OSL's digital assets and blockchain platform business have played a pivotal role in BC Technology's income, with 83% of its revenues derived from digital assets and blockchain, according to the report.

However, a large part of the company’s reasons for its narrower losses has been attributed to cost-cutting measures, including reducing its headcount by more than half.

Stock Performance and Industry Challenges

Despite recent growth pushing BC Technology's market value to nearly HK$1.9 billion, its shares are still down by 80% from their peak in June 2021 during the cryptocurrency boom triggered by the pandemic. The potential sale of OSL comes at a challenging time for crypto exchanges in Hong Kong, with weak demand and regulatory challenges affecting the industry.

Regulatory Actions and Industry Challenges

In response to the challenges faced by the crypto industry in Hong Kong, the Securities and Futures Commission (SFC) has partnered with the Hong Kong Police Force to establish a task force. This task force aims to combat illicit activities among crypto exchanges and conduct a comprehensive risk assessment for platforms deemed "suspicious." The future of crypto exchanges in Hong Kong remains uncertain amid intensified regulatory actions.

In addition, it is still far too soon to say that the recent JPEX scandal has been forgotten. The cryptocurrency platform has been accused of defrauding customers of over HK$1.5 billion, and even prominent artistes have been arrested for their involvement.