Hong Kong’s BC Technology Group Ltd is exploring the sale of its crypto platform OSL, one of only two exchanges licensed under digital-asset rules the city introduced in June, people familiar with the matter said.

BC Technology has gauged interest in OSL from possible buyers such as industry players and funds, and a HK$1 billion valuation has been mooted, the people said, asking not to be identified discussing private information.

Shares of BC Technology slumped as much as 16.7% in early Tuesday trading in Hong Kong, the biggest decline since June 12, following the Bloomberg News report.

OSL’s platform spans prime brokerage, exchange and custody services for crypto markets as well as a business providing infrastructure to financial institutions so that they can offer virtual-asset trading. BC Technology may decide to sell parts of OSL rather than the whole business, the people said.

Deliberations are ongoing and there’s no guarantee they will result in a deal, the people said.

“We are a highly transparent and regulated company,” a representative of BC Technology said in response to a Bloomberg News query. “We do not comment on market rumors and speculations.”

Hong Kong rolled out a digital-asset rulebook on June 1 that aims to foster a hub for the sector and allows retail investors to trade larger tokens on licensed exchanges. But crypto demand remains weak after last year’s market rout and ensuing bankruptcies, while the city’s strict framework may entail higher costs.

Hong Kong is also grappling with the fallout of the blowup at the unlicensed JPEX exchange, a scandal that further tarnished the digital-asset industry.

BC Technology’s net loss narrowed to HK$95 million in the six months ended June from over HK$300 million in the same period a year earlier, its interim report shows. OSL’s digital assets and blockchain platform business is the main income contributor for BC Technology, according to the report.

The interim report also said digital-asset trading volume on OSL nearly halved to HK$112.6 billion in the first six months of 2023 from same period a year ago.

BC Technology’s market value has more than doubled to nearly HK$1.7 billion from a low in August this year. The shares are still down more than 80% from the record high hit in June 2021, during the pandemic-era bubble in all things crypto.

OSL has withdrawn an application for a digital-asset license in Singapore and plans a revised submission. Some Singapore clients are being migrated to the exchange in Hong Kong, a person familiar with the matter said.

HashKey Exchange is the only other platform with a Hong Kong crypto permit. The exacting licensing process may become more challenging in the wake of JPEX, which authorities allege defrauded investors of HK$1.6 billion.

  - Bloomberg