The virtual asset industry is undergoing rapid transformation across Asia, with Hong Kong and Singapore emerging as two of the most influential regulatory hubs. As Hong Kong prepares to enforce its mandatory Virtual Asset Service Provider (VASP) licensing regime on June 1, 2025, and Singapore continues to refine its Payment Services Act framework, understanding the nuances of each jurisdiction’s licensing system has never been more critical for Web3 startups, exchanges, and asset managers.
This comprehensive guide explores the core similarities and differences between Hong Kong and Singapore’s virtual asset licensing frameworks, unpacks the real-world challenges in securing approval, and provides actionable insights for businesses navigating compliance.
Hong Kong's Evolving Virtual Asset Regulatory Framework
Hong Kong is positioning itself as a leading hub for crypto innovation in Asia. The Securities and Futures Commission (SFC) recently released a consultation paper outlining new regulatory standards for licensed virtual asset trading platforms — a move signaling the city’s commitment to balancing innovation with investor protection.
As of June 1, 2025, all crypto exchanges operating in or targeting Hong Kong users must obtain a VASP license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. This marks a pivotal shift from the previous opt-in model to full mandatory compliance.
Currently, only two platforms — OSL and Hashkey — hold full VASP licenses. However, several others have had their applications accepted by the SFC, entering what industry insiders call the "principle approval" phase.
Understanding Hong Kong’s Three-Tier Licensing System
Laurence Yuan, Partner at Fangda Partners, explains that Hong Kong’s licensing landscape can be divided into three main categories:
SFC-Regulated Licenses (Types 1, 4, 7, 9)
These apply when digital tokens are classified as securities:- Type 1: Dealing in securities — relevant for broker-dealers.
- Type 4: Advising on securities — for platforms offering investment advice.
- Type 7: Providing automated trading services — essential for exchanges.
- Type 9: Asset management — allows fund managers to allocate client capital into crypto assets.
Notably, traditional Type 9 license holders may invest up to 10% of portfolios in crypto. Exceeding this threshold requires a dedicated crypto-focused Type 9 license.
- Mandatory VASP License (Effective June 1, 2025)
Unlike the SFC licenses, this applies regardless of whether tokens are deemed securities. Any entity facilitating crypto trading must comply. This includes KYC/AML procedures, custody solutions, transaction monitoring, and adherence to travel rule requirements. - Future Stablecoin Regulation
While still in consultation phase, Hong Kong plans to introduce a licensing regime for stablecoin issuers by late 2025. It will likely cover issuance, lending against stablecoins, and wallet services.
The trend indicates convergence: future regulations may unify Type 1 and Type 7 under the VASP umbrella, though Types 4 and 9 remain distinct due to their advisory and fund management focus.
The Reality of Applying for a Hong Kong Crypto License
Bian Zhiwei, CEO of VDX Trading Platform, shares firsthand experience navigating Hong Kong’s complex application process.
Three Stages of the Application Journey
- Initial Submission & Acceptance
The SFC reviews basic eligibility. Several firms have publicly announced they’ve passed this stage. - Principle Approval (AIP)
This phase involves deep scrutiny of team qualifications (e.g., Responsible Officers, Core Functions Managers), internal policies, risk controls, and IT infrastructure. Document preparation alone can span thousands of pages. - Final Licensing & Operational Readiness
Requires full deployment of compliant systems — including secure custody, real-time transaction monitoring, and audit trails.
Hidden Costs and Timelines
- Financial Investment: Bian estimates that building an exchange from scratch could cost over $10 million USD, factoring in legal fees, staffing, system development, and compliance tools.
- Timeframe: Typically 12–24 months, depending on team readiness and responsiveness to regulator feedback.
- IT Infrastructure Challenges: Off-the-shelf solutions rarely meet SFC standards. Most applicants must build custom systems for AML checks, trade surveillance, and cold storage integration.
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Singapore’s Maturity in Virtual Asset Regulation
Singapore has long been regarded as Asia’s crypto capital, thanks to its forward-thinking yet cautious approach under the Payment Services Act (PSA), effective since January 2020.
Ryan Lin, Managing Director at Bayfront Law, notes that while over 200 companies initially applied for licenses, fewer than 50 remain active today — a reflection of tightened scrutiny following high-profile collapses like FTX and Three Arrows Capital.
Key Licensing Categories Under PSA
All crypto-related activities fall under the Digital Payment Token (DPT) service license, which covers:
- Cryptocurrency trading
- Wallet services
- Cross-border transfers
- Merchant acquisition
Applicants must also comply with stringent Travel Rule obligations — verifying sender/receiver information for transactions above SGD 1,500.
The Application Process: Rigorous but Transparent
- Documentation Phase
Submit a detailed business plan, compliance manual, and regulatory forms (Form 1 and Form 3). - Review & Q&A Rounds
Regulators typically issue 2–3 rounds of questions, focusing heavily on AML frameworks and operational resilience. - Executive Interview
Founders and compliance officers face a rigorous 3-hour interview with the Monetary Authority of Singapore (MAS). Legal counsel is not permitted during this session. - Conditional Approval → Full License
Final approval hinges on sustained compliance readiness and no major ownership changes post-application.
MAS now discourages acquisitions of licensed entities if ownership exceeds 20%, pushing firms toward organic growth instead.
Building a Winning Team: Talent as a Competitive Advantage
Tyler Wu, CEO of BHEX Singapore, emphasizes that success isn’t just about capital — it’s about capability.
“Your team makes up 30–40% of your application score.”
Key priorities include:
- Hiring professionals with financial compliance backgrounds
- Recruiting blockchain-savvy developers who understand on-chain forensics
- Establishing an in-house compliance function — outsourcing raises red flags with regulators
While some components (like KYC/AML software) can be sourced externally, core competencies — especially risk monitoring and policy design — should reside internally.
Development timelines for compliant systems range from 6 to 12 months, covering features such as:
- Address screening pre-deposit
- Real-time transaction alerts
- Integration with blockchain analytics tools
- Secure multi-signature custody
Annual operating costs for KYC checks alone can reach $3–$4 per user, not including server expenses or third-party SaaS subscriptions.
FAQ: Your Top Questions Answered
Q: Is a VASP license mandatory in Hong Kong after June 1, 2025?
A: Yes. Any platform facilitating crypto trading for Hong Kong users must obtain a VASP license — even if tokens aren’t classified as securities.
Q: Can I buy a licensed company in Singapore to fast-track entry?
A: Unlikely. MAS now blocks acquisitions exceeding 20% ownership unless the buyer undergoes full re-approval.
Q: Do I need both SFC and VASP licenses in Hong Kong?
A: Not necessarily. If your platform trades tokenized securities, you may need both. Otherwise, VASP suffices for pure crypto operations.
Q: How long does it take to get licensed in Singapore?
A: Typically 18–24 months, though some fast-track cases have taken 12 months with strong documentation and experienced teams.
Q: Are retail investors allowed to trade crypto in Singapore?
A: Yes, but with restrictions. Platforms must prevent leveraged trading for retail users and conduct robust suitability assessments.
Q: What’s the biggest reason applications fail?
A: Inadequate team expertise. Regulators prioritize leadership with proven financial services or compliance experience over pure tech founders.
Strategic Takeaways for Web3 Founders
- Hong Kong offers speed-to-market potential, especially with its growing acceptance of opt-in applications before full enforcement.
- Singapore provides long-term credibility, backed by MAS’s global reputation for balanced regulation.
- Both jurisdictions demand substantial investment — not just financially, but in human capital and technological rigor.
- Early engagement with legal advisors and pre-compliance audits significantly increases approval odds.
Whether you're based in Asia or expanding into the region, choosing the right jurisdiction depends on your business model, target market, and risk appetite.
👉 Explore how global innovators are aligning with regulatory standards without sacrificing agility.
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