Ⅰ. Consultation Conclusions and Further Public Consultation
On December 24, 2025, after considering feedback from the industry and market participants, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Securities and Futures Commission (SFC) published their conclusions regarding the legislative proposal to regulate dealing in virtual assets (the Consultation Conclusions). The proposal was set out in a public consultation paper published in June 2025 (the Consultation Paper) and proposed the establishment of a new virtual asset (VA) dealing licence under the legal framework of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615 of the Laws of Hong Kong) (AMLO). The Consultation Conclusions summarize the preliminary regulatory approach and the licensing requirements in relation to VA dealing. The FSTB and the SFC have launched a further public consultations regarding the legislative proposal to introduce separate licensing requirements under the AMLO for VA advisory services and VA management services.
According to the Consultation Conclusions, three new licences for VA-related services will be introduced under the AMLO, covering three major categories: (1) VA dealing, (2) VA advisory and (3) VA management.
Compared to the existing licences for regulated activities under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (SFO) for similar businesses, namely Type 1 (dealing in securities), Type 4 (advising on securities), and Type 9 (asset management), which need to be uplifted to cover VA-related business activities, the new VA dealing licence will cover a broader scope of business activities and models than the current uplifted Type 1 licence. Financial institutions currently holding an uplifted Type 1 licence can obtain the new VA dealing licence through an expedited approval process. The SFC suggests that the regulatory requirements to be imposed on the new VA advisory services licence and the VA management services licence, should follow those applicable to the existing uplifted Type 4 and Type 9 licences. Financial institutions that currently hold the uplifted Type 4 and Type 9 licences may also obtain the new VA advisory services licence and the VA management services licence, through an expedited approval process.
In the following sections, we provide a detailed analysis of the regulatory requirements outlined in the Consultation Conclusions for the three new licences, under the legal framework of the AMLO.
1. First Licence: VA Dealing Licence
Scope and Coverage
VA has the same definition under the AMLO and excludes securities or futures contracts as defined under the SFO.
VA Dealing Services include:
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simple dealing services, such as conversions between different VAs or between VA and fiat currency
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more complex dealing services, such as VA brokerage activities
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are irrespective of whether the services are to be provided through different channels (e.g., physical outlets or online platforms)
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While VA margin trading, VA staking and VA borrowing and lending will fall within the scope, the SFC will consider whether to permit licensed institutions to provide such services
VA Dealing Services may include:
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peer-to-peer transactions, or the provision of decentralized or technological services
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it depends on the substance of the service
VA Dealing Services exclude:
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activities in derivatives and structured products referencing VA (which remain subject to the licensing requirements for regulated activities under the SFO, including Type 1 (dealing in securities), Type 2 (dealing in futures contracts), and Type 11 (dealing in OTC derivative products or advising on OTC derivative products))
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those services that deal solely in tokenised securities
We understand that the types of dealing services covered by VA Dealing Services and the scope of the service providers are broader than those currently captured under the uplifted Type 1 licence commonly observed in the market. As a result, typical VA exchange shops and platforms offering VA-fiat OTC conversion services will also need to apply for this licence. This expansion will bring a wider range of service providers within the SFC’s regulatory perimeter, thereby enhancing investor protection.
It is noteworthy that VA Dealing Services excludes services related to traditional securities (including structured products and derivatives) and futures contracts, thereby avoiding overlapping with the existing licensing regime under the SFO. Financial institutions providing services related to such products will continue to be regulated by the relevant licensing requirements under the SFO.
Exemptions
Exemptions from the Requirement to Hold a VA Dealing Licence:
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transactions conducted through SFC-regulated VA dealers
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transactions conducted as principal (for one’s own account)
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intra-group transactions
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the use of VAs by a purchaser of goods or users of services as a means of payment for such goods or services
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SFC-regulated VA managers which deal solely for the purpose of providing VA management services for which it is licensed or registered (this is similar to the licensing exemption for conducting Type 1 regulated activities when holding a Type 9 licence)
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stablecoin issuers licensed by the Hong Kong Monetary Authority (HKMA) and conducting regulated stablecoin activities
Potential exemptions from the requirement to hold a VA Dealing Licence:
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distribution of VAs generated as rewards for ledger maintenance or transaction validation (e.g., the distribution of staking rewards)
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activities by VA issuers regarding VAs created or minted by them, if conducted through SFC-regulated intermediaries or offered exclusively to professional investors
The exemptions applicable to the VA Dealing Licence broadly mirror those applicable to the Type 1 licence under the SFO, so as to avoid an increase in compliance and operational costs for businesses in which no 'dealing on behalf of others' is involved and preventing the unnecessary duplication of the regulatory requirements.
Execution Platform
Considering that VA trading is borderless by nature and that a more flexible approach could create greater room for the development of Hong Kong’s VA market, the SFC is considering whether VA trades should be allowed to be executed on platforms other than SFC-licensed VA trading platforms (VATPs). This approach is intended to strike a balance between investor protection and market development.
Financial institutions holding an uplifted Type 1 licence are currently only permitted to execute clients’ trades through SFC-licensed exchanges. If the SFC allows holders of the VA Dealing Licence to execute VA trades on exchanges other than those licensed by the SFC, service costs will be reduced and the competitiveness of these services will be enhanced, thereby attracting more investors to utilize such services. However, it is essential to consider the credibility and compliance records of such exchanges, to avoid any potential threats to the security of client assets.
Custodian
In the initial stage of the regime, the SFC will require VA dealers to place client VAs with SFC-regulated VA custodian service providers. This is to ensure proper client asset segregation and reduce risks such as insolvency, fraud, cyberattacks and other threats. However, the SFC has indicated that it will consider adjusting custody requirements in the future based on the variety of business models.
No Transitional Arrangement
To safeguard investor rights and avoid regulatory uncertainty, the VA Dealing Licence regime will not include a transitional period or a deeming arrangement to existing VA dealing service providers. The licensing regime will take full effect on the commencement date of the statutory provisions. However, when determining an appropriate commencement date, the SFC will take into account the time required for affected institutions to adjust their business models. It is recommended that industry stakeholders already engaged in VA dealing services (including those holding an uplifted Type 1 licence) contact the SFC and initiate pre-application communication as early as possible, in order to understand the licensing processes and requirements, and avoid undue business disruptions arising from a failure to obtain a VA Dealing Licence in a timely manner.
Expedited Approval Process
For SFC-licensed VATPs as well as licensed corporations and registered institutions currently providing VA dealing services under an uplifted Type 1 licence, the SFC will introduce an expedited approval process and will be in touch with these entities regarding the application procedures.
2. Second Licence: The Proposed VA Advisory Licence
Content and Interpretation of the Consultation Conclusions
Scope and Coverage
Regarding the definition of 'advising on securities' under the SFO, 'advising on VA' refers to:
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giving specific advice on whether; which; the time at which; or the terms or conditions on which, VAs should be acquired or disposed of; or
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issuing analyses or reports, to facilitate the recipients of said analyses or reports to form a view on the aforementioned VA dealing decisions.
We note that some market participants providing advice solely on VAs may not necessarily hold an uplifted Type 4 licence, as their activities fall outside the scope of the traditional Type 4 regulated activity of 'advising on securities'. Under the proposed VA Advisory Licence regime, such institutions would be required to obtain the VA Advisory Licence.
Exemptions
In reference to the exemptions applicable to the Type 4 licence under the SFO, the following activities are exempt from the requirement to hold a VA Advisory Licence:
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solely advising wholly-owned group companies
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acts performed wholly incidental to licensed VA dealing
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acts performed solely for the purpose of licensed VA fund management
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solicitors, counsels and certified public accountants for acts wholly incidental to their professional practice
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acts performed wholly incidental to a registered trust company’s discharge of duty
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acts conducted through a general available publication or broadcast
Regulatory Requirements
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Broadly follow the requirements applicable to the uplifted Type 4 licence (i.e., the content in Part II of Appendix 6 to the Joint Circular on Intermediaries’ VA-Related Activities (Joint Circular) issued by the SFC and the HKMA on December 22, 2023).
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To observe the anti-money laundering and counter-terrorist financing (AML/CFT) requirements stipulated in Schedule 2 to the AMLO, relating to CDD and record-keeping.
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Other requirements are expected to include those on knowledge and experience (such as having passed a test on regulatory knowledge), risk management, financial reporting and disclosure, conduct and business, information and notifications and record keeping. They are also expected to include investor protection safeguards such as the need to assess clients’ VA knowledge, to provide clients with adequate training, to conduct client risk assessments and risk profiling, to ensure clients’ suitability and to prevent, avoid and disclose any actual or potential conflicts of interest.
No Transitional Arrangements
The SFC proposes that the VA Advisory Licence regime will not include a transitional period or a deeming arrangement to pre-existing VA advisory service providers.
It is recommended that industry stakeholders already engaged in VA advisory services (including those holding an uplifted Type 4 licence) contact the SFC and initiate pre-application communication as early as possible, in order to understand the licensing process and requirements, and avoid undue interruptions to their business operations that may result from not obtaining the VA Advisory Licence in a timely manner.
Expedited Approval Process
For financial institutions holding an uplifted Type 4 licence, the SFC may introduce an expedited approval process.
3. Third Licence: Proposed VA Management Licence
Content and Interpretation of the Consultation Conclusions
Scope and Coverage
VA Management is understood to mean managing a portfolio containing VAs (such as VA funds) for another person.
Given the inherent risks of investing in VAs, the SFC proposes not to set a de minimis threshold (e.g., a stated investment objective or an intention to invest 10% or more of the gross asset value of a portfolio in VAs). This means that any entity which provides asset management services for a portfolio that invests in VAs, regardless of the amount of VAs involved, will need to obtain a licence or registration. This approach prevents entities from structuring activities to circumvent regulations by staying just below a limit.
Under the current regulations in relation to a Type 9 licence, if a manager invests less than 10% of the total portfolio value in VAs, it only needs to notify the SFC of such activities and does not require a licence uplift. Under the proposed new VA Management Licence regime, such managers would also be required to obtain a VA Management Licence.
We note that some managers in the market who invest 100% of assets in VAs may not necessarily hold a Type 9 licence, as their activities do not fall within the scope of the traditional Type 9 regulated activity of managing securities portfolios. Under the proposed new VA Management Licence regime, such managers would be required to obtain a VA Management Licence.
Regulatory Requirements
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These follow the requirements applicable to the uplifted Type 9 licence (i.e., the content in Appendix 7 to the Joint Circular).
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To observe the AML/CFT requirements stipulated in Schedule 2 to the AMLO relating to CDD and record-keeping.
Custody Arrangements
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The SFC is considering whether VA management service providers should only safekeep the VAs of the private funds they manage with SFC-regulated VA custodian service providers, or whether they should have the flexibility to use other types of custodians or alternative custody arrangements.
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For new tokens invested in by private equity or venture capital fund managers, the SFC will also consider allowing self-custody up to a limited threshold and without the need to obtain a VA custodian service provider licence or registration.
No Transitional Arrangements
The SFC proposes that the VA Management Licence regime will not include a transitional period or a deeming arrangement to pre-existing VA management service providers.
It is recommended that industry stakeholders that are already engaged in VA management services (including those holding an uplifted Type 9 licence) contact the SFC and initiate pre-application communication as early as possible, in order to understand the licensing procedures and requirements, and avoid potential adverse impacts on their operation due to failure to obtain the licence in a timely manner.
Expedited Approval Process
For financial institutions holding an uplifted Type 9 licence, the SFC may provide an expedited approval process.
Ⅱ. Next Step
The FSTB and the SFC will finalize legislative proposals based on the Consultation Conclusions in response to feedback from the public consultation. The legislative proposals will provide for the establishment, under the AMLO, of separate licensing regimes applicable to: (1) VA dealing service providers, (2) VA advisory service providers, and (3) VA management service providers. It is expected that the bill will be introduced into the Legislative Council for scrutiny in 2026.
Ⅲ. Conclusion
Under the Virtual Asset Service Provider (VASP) licensing regime under the AMLO, which took effect on June 1, 2023, and the Type 1 and Type 7 regulated activity licensing regimes under the SFO, VATPs licensed by the SFC that hold VASP, Type 1, and Type 7 licences (collectively referred to as Exchange Licences) are permitted to provide VA dealing services to clients. These VA dealing services under the Exchange Licenses are not limited to on-platform trades executed through a matching engine but have also been extended to include OTC dealing services.
Apart from Exchange Licences, other financial institutions providing VA dealing, VA advisory or VA management services are currently regulated by the SFC under the SFO’s Type 1 (dealing in securities), Type 4 (advising on securities), and Type 9 (asset management) regulated activity licences, which require corresponding uplifts to cover VA-related activities. However, the existing licensing regime under the SFO does not adequately capture the growing market demand for VA OTC trading services, and the service models available to licensed financial institutions are relatively limited (e.g., institutions holding an uplifted Type 1 licence can only provide VA dealing services to clients through SFC-licensed exchanges). Additionally, some entities that provide advisory or management services solely in relation to VAs (without involving securities) may fall outside the SFC’s regulatory perimeter, as their business does not involve traditional securities.
In light of the evolving market environment, the need to ensure adequate investor protection, and to promote the healthy development of Hong Kong’s VA industry, the FSTB and the SFC published the Consultation Paper in June 2025. The Consultation Paper proposed bringing a broader range of VA-related activities, including VA OTC trading, into the regulatory scope and establishing a dedicated VA dealing licensing regime. On December 24, 2025, the Consultation Conclusions and the public consultation were released, with the public consultation recommending the introduction of dedicated licensing regimes for VA advisory and VA management services.
The introduction of new licensing regimes under the AMLO covering the three major categories of services, namely (1) VA dealing, (2) VA advisory, and (3) VA management, will further enhance Hong Kong’s regulatory framework for VA-related services. The licensing regimes clarify the regulatory responsibilities and their scope, and through stringent qualification, risk control and ongoing compliance requirements, ensure that institutions fulfill their obligations including safeguarding investor’s assets and complying with the AML/CFT requirements. These three new licensing regimes will operate independently of the SFO regimes applicable to traditional securities and futures contracts related services. They will bring service providers that exclusively provide VA-related services under regulatory oversight, which better aligns with the development of the VA industry.
As the SFC further refines the legislative framework, consults with industry stakeholders and optimizes approval processes, Hong Kong is expected to establish a transparent and robust regulatory regime for VA-related services. This will reinforce Hong Kong’s position as an international hub for virtual assets, and provide stronger institutional safeguards for investor confidence and sustainable market development.
Source: JunHe Law Firm
Authors:
- Jacqueline Qiao, Partner, zyqiao@junhe.com, Practice Area: FinTech, Web3 & Virtual Assets, Financial Derivatives
- Julia Cheng, Associate, jcheng@junhe.com
- Fiona Huang, Paralegal, fionahuang@junhe.com
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