Five takeaways on the new Hong Kong virtual asset regulatory regime

Five takeaways on the new Hong Kong virtual asset regulatory regime

The Financial Services and the Treasury Bureau ("FSTB") and the Hong Kong Securities and Futures Commission ("SFC") on 24 December 2025 (i) concluded their joint consultations ("Consultation Conclusions") to introduce new licensing regimes for virtual asset₁ ("VA") dealing and custodian service providers; and (ii) further proposed new licensing regimes on VA advisory and management service providers for feedback by 23 January 2026. The draft legislation is being prepared and will be introduced to the Legislative Council in 2026.

Regulated firms that have already been approved by the SFC/Hong Kong Monetary Authority ("HKMA") to provide VA dealing services (i.e., firms that have had their licences “uplifted” to provide VA dealing services) will benefit from an expedited approval process.

We set out below our five key takeaways on the Consultation Conclusions.

1. Scope of VA dealing regime to mirror the traditional securities regime

As a recap, under the original proposal, any person carrying on a business of providing VA service of dealing in any VAs (e.g., VA conversion, brokerage activities, block trading activities and other relevant activities of advisors or asset managers) in Hong Kong would need to be licensed or registered with the SFC, unless an exemption applies. The precise scope of VA dealing services was a key topic of the consultation for market participants as there were certain ambiguities. Further to the Consultation Conclusions, the scope of VA dealing services will be broadly aligned with the securities regime (i.e., the regime for Type 1 regulated activity of “dealing in securities”) under the “same activity, same risks, same regulation” principle. The FSTB and the SFC have also helpfully clarified that VA derivatives will be excluded from the scope of the VA dealing regulatory regime. Various exemptions mirroring the securities regime, including the dealing through, dealing as principal, intra-group transactions, payment for such goods or services with VAs, will be further considered.

2. Licensees may only partner with SFC-licensed VATPs or custodians

One notable aspect of the new VA dealing regime is that VA dealing service providers may not be allowed to partner with non-SFC licensed VATPs, liquidity providers or custodians when providing VA dealing services.₂ Accordingly, new licensees under the VA dealing regime may only be able to partner with the SFC-licensed VATPs for VA dealing activities and, in the future, with SFC-regulated VA custodians for VA custody. In practice, this requirement will also mean that new licensees under the VA dealing regime may only deal in the VA product suite that SFC-licensed VATPs can provide.

3. No transitional period/grandfather period

No transitional period or deeming arrangement to pre-existing VA dealing service providers will be provided, despite respondents’ feedback. The FSTB and the SFC have recommended early engagement with the SFC and the HKMA (as appropriate) to initiate their pre-application processes. The key practical question that remains is when the commencement date will be, as this will determine how much time there is for applicants to adjust their business models and prepare their license applications. Firms should therefore start preparing early, notwithstanding that the draft legislation has not yet been published.

4. Further guidance on the territorial scope of the new regime to follow

Overseas market participants providing services to Hong Kong persons will need to consider the territorial scope of the new regime. The new regime will have a similar licensing perimeter to the existing securities regime which, among other things, prohibits a person (whether in Hong Kong or from a place outside Hong Kong) from actively marketing services to the Hong Kong public. While, under the existing securities regime, there is already some guidance on what “actively marketing” means (see the FAQs on "actively markets" under section 115 of the SFO and section 53ZRB of the AMLO), the FSTB and the SFC have indicated that they will provide further guidance on the scope of “actively marketing”, which may also clarify the scope of reverse solicitation.

5. Further consultation on VA advisory and management service providers

The FSTB and the SFC further proposed to regulate VA advisory and VA management services under a licensing regime with the SFC, which will broadly mirror Type 4 regulated activity of “advising on securities” and Type 9 regulated activity of “asset management” (“RA9”), unless an exemption applies. Notably, there will be no de minimis threshold (e.g., 10% or more of the gross asset value of a portfolio in VAs) for VA management services, unlike the current requirements today. In other words, a VA manager that invests in any VAs, regardless of the amount of VAs involved, will need to be licensed under the proposed regime. This will include SFC-licensed asset managers with the RA9 VA uplift. VA managers may be required to partner only with SFC-regulated VA custodian service providers, although the SFC will not impose restrictions on the types of VAs custodied by SFC-regulated VA custodians.

_{1 Adopting the definition of VA in the SFC’s virtual asset trading platforms (“VATP”) licensing regime, as set out in section 53ZRA of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”), which refers to a cryptographically secured digital representation of value that possesses a range of features (including being expressed as a unit of account or a store of economic value, used for payment for goods or services, discharge of a debt etc.).
2 This is still under the SFC’s review, as set out in paragraphs 13 to 18 of the Consultation Conclusions to Regulate Dealing in VAs and the Joint Circular on Intermediaries’ Virtual Asset-Related Activities, as amended.}