(Bloomberg) -- 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 ($128 million) valuation has been mooted, the people said, asking not to be identified discussing private information.

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, they said.

The report that BC Technology is considering selling the OSL business is “factually inaccurate and highly misleading,” the company’s board said in an exchange statement on Tuesday. A representative for the company on Monday said “we do not comment on market rumors and speculations.”

Shares of BC Technology once slumped by a record 37% on Tuesday after the Bloomberg News report. The stock is still down 24% as of 3:11 p.m. in Hong Kong.

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OSL has withdrawn an application for a digital-asset license in Singapore and plans a revised submission.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.

Read More: Hong Kong’s Crypto Push Gets Blunt Warning as Probe Erupts

--With assistance from Suvashree Ghosh.

(Updates with BC Technology’s statement in fourth paragraph.)

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