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Hong Kong is developing a comprehensive licensing framework for virtual asset activities, creating distinct regimes for virtual asset dealing services, virtual asset custodian services, and virtual asset advisory and management services. This framework is intended to promote investor protection, market integrity, and Hong Kong's standing as an international financial centre for virtual assets.
With respect to the implementation timeline, the Financial Services and the Treasury Bureau (FSTB) together with the Securities and Futures Commission (SFC) intend to finalise legislative proposals for establishing licensing regimes for virtual asset dealing, advisory, and management service providers under the Anti‑Money Laundering Ordinance (AMLO), with the aim of introducing a bill into the Legislative Council in 2026.
Virtual Asset Dealing Service Providers
Under this regime, any person or entity engaging in the business of dealing in virtual assets may be required to be licensed. The statutory definition generally covers making, offering, or inducing agreements to acquire, dispose of, or subscribe for virtual assets, but specifically excludes securities and futures contracts, which remain governed by existing securities laws.
Key statutory requirements:
- Minimum paid-up capital: HK$5 million
- Minimum liquid capital: Up to HK$3 million, dependent on the business model
- Obligation for all providers to apply for a licence: There are no transitional "deeming" provisions; and all existing and new market participants must obtain a licence before commencing or continuing business
The regime applies an activity-based principle, and people operating payment, margin, or trading services that fall within the statutory scope may also be captured.
Virtual Asset Custodian Service Providers
A stand-alone licensing regime applies to entities that wish to as custodians of virtual assets. This includes any person that safekeeps virtual asset private keys or has unilateral authority to transfer client assets. The scope is technology-agnostic and covers both direct custody and situations where the provider retains ability to unilaterally effect or authorise asset transfers.
Key statutory requirements:
- Minimum paid-up capital: HK$10 million
- Minimum liquid capital: HK$3 million
- Operational standards: Requirements regarding robust internal controls, operational resilience, and suitable insurance arrangements for client asset protection
- No reliance on transitional rights: All existing operators and incumbents must secure a licence under the new regime prior to or at commencement
Entities that do not retain authority or capability to transfer client assets (such as non-custodial wallet providers) may not generally be within statutory scope.
Virtual Asset Advisory and Management Service Providers
A separate licensing requirement may apply to entities advising on or managing portfolios of virtual assets for other investors. The statutory regime may generally reflect the approach for advising on securities (similar to Type 4 licence) and asset management (similar to Type 9 licence).
Key statutory requirements:
- Minimum paid-up capital: HK$5 million (advisory and management)
- Minimum liquid capital: HK$100,000 (where not holding client assets); and HK$3 million (where holding client assets)
- Obligation for all providers to apply for a licence: Prohibition on offering, holding out, or marketing such services to the public without an appropriate licence
Supporting Regulatory Principles and Enforcement
- The new licensing regime does not cover providers dealing solely in tokenised securities.
- Marketing prohibitions apply alike to Hong Kong and overseas persons actively soliciting Hong Kong clients.
- Supervisory, disciplinary, and appeal powers for the SFC and the Hong Kong Monetary Authority (HKMA) mirror those for traditional and banking services, with powers to impose sanctions, revoke or suspend licenses, and permit statutory appeals.
Legal and Operational Implications
The new regimes may introduce potentially material obligations for applicable business operators, requiring a thorough review of, among other things, operational infrastructure, capital adequacy, compliance procedures, and internal controls. Companies can consider undertaking:
- Proactive licensing steps: May need to ensure all required licences are secured before any applicable business or marketing may be conducted in Hong Kong
- Review of operational and client asset control arrangements: May need to ensure compliance with capital, segregation, insurance, and operational resilience standards
- Ongoing monitoring and enhancement of AML/CFT systems: May need to ensure such monitoring and enforcements consistent with both regulatory requirements
A failure to comply may result in criminal, regulatory, and civil/or penalties, including enforcement actions.
Conclusion
The expanded licensing framework for virtual asset dealing, custody, advisory, and management may strengthen Hong Kong's role as a leading jurisdiction for virtual assets. The regulatory approach is risk-focused, technologically adaptive, and consistent with global norms, providing legal clarity and protection for market participants and investors alike.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
