Hong Kong has recently reaffirmed its ambition to become a global hub for virtual assets, with the Financial Services and Treasury Bureau (FSTB) releasing A Policy Statement on the Development of Virtual Assets in Hong Kong. This bold move has significantly boosted market confidence and clarified the regulatory landscape for digital asset businesses. With clearer rules in place, operators now have a transparent path toward compliance and long-term growth.
In this comprehensive guide, we’ll break down the key licensing requirements for virtual asset platforms in Hong Kong. From understanding what qualifies as a virtual asset to identifying which licenses are mandatory—and which may be optional—we’ll equip you with the knowledge needed to navigate Hong Kong’s evolving regulatory framework.
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What Qualifies as a Virtual Asset in Hong Kong?
Before diving into licensing, it's essential to understand how Hong Kong defines virtual assets. According to the Securities and Futures Commission (SFC), a virtual asset is:
"A digital representation of value that can be digitally traded or transferred and used for payment or investment purposes."
This broad definition includes:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Utility tokens
- Security tokens backed by real-world assets
- NFTs and other digital collectibles
- Any blockchain-based digital asset with perceived value
Crucially, not all virtual assets fall under SFC regulation. The SFC only regulates platforms that offer trading in security-type virtual assets—those that qualify as "securities" or "futures contracts" under the Securities and Futures Ordinance (SFO).
Platforms dealing exclusively with non-security tokens (e.g., pure utility or collectible NFTs) are currently outside the SFC’s licensing scope. However, if your platform lists even one token classified as a security, you enter regulated territory.
This distinction is vital: only platforms facilitating transactions in tokenized securities require SFC licensing.
Understanding Hong Kong’s Financial Licensing Framework
Hong Kong uses a tiered licensing system managed by the SFC, where each license type corresponds to a specific regulated activity. These are commonly referred to as “Type X” licenses.
Here’s an overview of the most relevant licenses for virtual asset businesses:
Type 1 License – Securities Dealing
Permits firms to buy, sell, and deal in listed securities. For virtual asset platforms offering tokenized securities, this is non-negotiable.
Type 4 License – Advising on Securities
Allows firms to provide investment advice on securities. While not mandatory at launch, platforms offering research, portfolio recommendations, or market analysis should consider obtaining this license.
Type 7 License – Automated Trading Services
Required for operating electronic trading systems or platforms that match buy/sell orders automatically—essentially any centralized exchange model.
Type 9 License – Asset Management
Needed for managing investment portfolios involving securities. If your platform offers managed accounts, index funds, or staking products tied to security tokens, this license becomes essential.
While Types 11 and 12 exist (for credit rating and investment advice via automated tools), they are not yet implemented and thus not applicable.
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Which Licenses Do You Actually Need?
Based on the SFC’s 2019 Position Paper on Regulating Virtual Asset Trading Platforms, any operator providing trading services for at least one security-type virtual asset must hold:
- Type 1 License (Securities Dealing)
- Type 7 License (Automated Trading Services)
This requirement is not theoretical. OSL Digital Securities Limited, the first fully licensed virtual asset exchange in Hong Kong, holds both Type 1 and Type 7 licenses—a strong indicator of regulatory expectations.
However, this doesn’t mean every platform must follow the exact same path. Depending on your business model, additional licenses may apply:
When You Might Need a Type 9 License
If your platform manages client portfolios invested in virtual asset funds—even partially—you may need a Type 9 license. The SFC has made it clear that firms managing portfolios containing securities-like tokens must be authorized, regardless of whether traditional assets are also involved.
Additionally, if you distribute funds in Hong Kong that invest in non-security virtual assets (e.g., crypto-only ETFs), you may still require a Type 1 license due to local distribution activities.
The Role of Type 4 License
While advisory services aren’t always central to exchange operations, many platforms integrate market insights, price alerts, or portfolio suggestions. If these constitute personalized investment advice, they fall under Type 4 regulated activity.
Although not always enforced immediately, proactive compliance reduces future legal risk. Many compliant firms apply for Type 1 and Type 4 licenses together.
Can You Combine Licenses Through Acquisition?
A common question arises: Can I acquire multiple licensed entities and merge them into one operating platform?
The short answer: No.
The SFC does not allow “patchwork” compliance through the acquisition of separate licensed companies. Each license is granted based on the applicant’s operational structure, risk controls, governance framework, and business plan—not just ownership.
Even if you own several licensed firms, unless they operate under a unified compliance system approved by the SFC, you won’t meet regulatory standards. The only viable route is to establish a new legal entity in Hong Kong and apply directly for the necessary licenses.
Note: Only corporate entities can hold SFC licenses—individuals, DAOs, or unincorporated associations are ineligible.
Regulatory Stability: Open-Ended Licensing Model
One of Hong Kong’s most attractive features is its open-ended licensing regime, confirmed in the FSTB’s 2021 consultation conclusions.
Unlike jurisdictions requiring periodic re-licensing or renewal reviews, Hong Kong-issued virtual asset licenses remain valid indefinitely—provided the licensee remains compliant and operational.
This long-term certainty encourages substantial investment in technology infrastructure, cybersecurity, and talent development. It signals that Hong Kong is committed to building a stable, innovation-friendly environment for digital finance.
Who Can Trade? Access Is Currently Limited
Even licensed platforms face restrictions on user access. As of now, only professional investors can trade on SFC-regulated virtual asset exchanges.
To qualify as a professional investor in Hong Kong, individuals or institutions must meet at least one of these thresholds:
- Individuals: HK$8 million (or equivalent) in investment portfolio
- Corporations/Partnerships: HK$8 million in investment portfolio OR HK$40 million in total assets
- Trusts: HK$40 million in total assets
This high barrier effectively excludes retail investors—for now.
However, industry experts believe this will change as the ecosystem matures. With increasing investor protection mechanisms and market stability, retail access is expected to open gradually in the coming years.
Frequently Asked Questions (FAQ)
Q1: Do I need a license if I only trade non-security tokens?
No. Platforms dealing solely with utility tokens or NFTs not classified as securities do not require SFC licensing—unless they also offer services involving regulated financial products.
Q2: Can a foreign company apply for an SFC license?
Yes, but it must establish a locally incorporated subsidiary in Hong Kong that meets all regulatory requirements, including physical office space, qualified responsible officers (ROs), and compliance systems.
Q3: How long does the licensing process take?
Typically 6–12 months. The timeline depends on application completeness, responsiveness during review, and readiness of internal controls and audit trails.
Q4: Are decentralized exchanges (DEXs) regulated?
Currently, DEXs operating without custody or direct control over user funds may fall outside SFC jurisdiction—but this could change as regulations evolve. Centralized features like order matching or advisory services increase regulatory exposure.
Q5: What happens if I operate without a required license?
Unlicensed operation constitutes a criminal offense under the SFO. Penalties include fines up to HK$5 million and imprisonment for up to 7 years. The SFC actively monitors suspicious platforms.
Q6: Will retail investors ever be allowed to participate?
Yes—this is widely anticipated. Regulatory authorities have indicated that once sufficient safeguards are in place (e.g., custody standards, disclosure rules), retail access will be cautiously introduced.
Final Thoughts: Building the Future of Finance in Hong Kong
Hong Kong is positioning itself as Asia’s premier gateway for institutional-grade virtual asset innovation. With clear licensing pathways, regulatory stability, and growing government support, the city offers unmatched opportunities for compliant digital finance ventures.
While entry barriers remain high—especially regarding capital, expertise, and governance—the rewards are substantial. By securing the right licenses early and aligning with SFC expectations, your platform can become part of Hong Kong’s next-generation financial infrastructure.
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