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Crypto License in Hong Kong- How does it Work?

Crypto trading platforms facilitating trade in securities and futures contracts remain regulated by the existing Securities and Futures Ordinance (SFO).

Recent legislative developments have shifted the regulatory landscape for cryptocurrency exchanges in Hong Kong. The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Act 2022 introduced stringent regulations, effective from April 1, 2023. Under the new framework, virtual asset service providers (VASPs) are mandated to secure a license from the Securities and Futures Commission (SFC) to operate lawfully.​

The SFC started processing applications for crypto trading platform licenses on June 1, 2023. Check new roolbook.

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Activities allowed in Hong Kong with Crypto License

Regulatory structure
  • Hong Kong offers clear crypto regulations, ensuring a secure environment for investors and operators.
Mandatory Licensing
  • Crypto exchanges must obtain SFC licenses, adhering to AML and CTF guidelines.
Access to capital
  • There's a keen interest in crypto investments among Hong Kong's populace.
Reputation and credibility
  • The city is a hub for blockchain and fintech innovation.
Trust
  • A crypto license signals a business’s commitment to regulatory compliance.
International access to markets
  • Licensing opens doors to the wider Asian financial markets.
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How to Obtaining a Crypto License in Hong Kong?

 

To secure a crypto license in Hong Kong, applicants must:

  1. Declare their intention to operate within the Hong Kong market.

  2. Satisfy the 'fit and proper' criteria, which involve assessments of:

    • Criminal history clearance.

    • Track record in anti-money laundering (AML) and counter-financing of terrorism (CFT).

    • Financial stability.

    • Educational background and relevant certifications.

    • Personal and professional reputation, experience, integrity, and financial soundness.

  3. Designate at least two individuals in the application who are deemed fit and qualified to offer virtual asset (VA) services, to serve as responsible officers.

  4. Seek approval for the physical premises intended for storing mandatory records or documents as per regulatory requirements.

  5. Be mindful that the SFC reserves the right to impose specific conditions on the issued license. These conditions may pertain to risk management, AML/CFT protocols, financial resources, cybersecurity measures, and more, as stipulated in Section 53ZRK of the regulation.

Frequently Asked Questions

What types of crypto licenses are available in Hong Kong?

Currently, Hong Kong doesn't offer dedicated crypto licenses. However, depending on your business activity, you might need one or more of the following licenses issued by the Securities and Futures Commission (SFC):

  • Type 1 License: To deal in securities (applicable for security token offerings - STOs).
  • Type 9 License: To provide automated trading services (applicable for some crypto exchanges).
  • Money Service Operator (MSO) License: To operate a remittance or money changing service involving cryptocurrencies.
Which regulatory body governs crypto activities in Hong Kong?

The Securities and Futures Commission (SFC) regulates activities related to securities and futures contracts, which may encompass some crypto-related businesses.

What are the eligibility requirements for obtaining a crypto license (through SFC licenses)?

Eligibility criteria vary by license type, but generally include:

  • Legal entity registered in Hong Kong.
  • A strong business plan outlining your crypto operations.
  • Experienced management team with relevant financial and technological expertise.
  • Robust AML/KYC compliance procedures in place.
What is the application process for a crypto license (through SFC licenses)?

The SFC website details the application process for each license type. It involves submitting a comprehensive application package, paying fees, and undergoing a thorough review process.

What are the ongoing regulatory requirements for maintaining a crypto license (through SFC licenses)?

License holders must adhere to ongoing SFC regulations, including:

  • Regular reporting on financial activities and transactions.
  • System audits and compliance checks.
  • Maintaining strong AML/KYC programs to prevent financial crime.
How much does it cost to obtain a crypto license (through SFC licenses) in Hong Kong?

License application fees and ongoing regulatory costs vary depending on the license type and your company structure.

What are the benefits of acquiring a crypto license (through SFC licenses) in Hong Kong?

Benefits include:

  • Access to a major financial hub with a reputation for stability and innovation.
  • A clear regulatory framework for specific crypto activities like STOs.
  • Potential tax advantages depending on your business model.
Where can I find more information about acquiring a crypto license (through SFC licenses) in Hong Kong?

The SFC website is the primary source of information: https://www.sfc.hk/en/

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Where can I find more information about acquiring a crypto license (EMI license) in Latvia?

The FKTK website is the primary source of information: https://www.bank.lv/en/about-us

Where can I find more information about acquiring a crypto license in Dubai?

The VARA website is the primary source of information: https://www.vara.ae/en/

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