Hong Kong has clear goals to be at the forefront of the cryptocurrency market. According to recent reports, Hong Kong is the most “crypto-ready” country in the world in 2025. Because of its large number of blockchain startups, favorable crypto legislation, competitive structure, and 0% capital gains tax for individuals, Hong Kong has become a crypto hub and a focal point of crypto news.
Beginning in 2023, Hong Kong required crypto businesses operating in the country or actively marketing their services to investors to obtain a license from its Securities and Futures Commission (SFC). This all stems from the Anti-Money Laundering and Counter Terrorist Financing Ordinance (AMLO). This provided a major update to the existing licensing regime when it comes to virtual asset service providers (VASPs).
Hong Kong has seen a 250% increase in blockchain-related business in its fintech sector, making virtual assets a significant part of the territory. New licensing requirements aim to strengthen the current cryptocurrency regime in Hong Kong and keep them at the forefront of the global crypto market.
New Licensing Requirements
Regulators are taking several steps to advance Hong Kong’s regulatory requirements. Under the SFC, any Virtual Asset Trading Platforms (VATPs) that operate in Hong Kong (or actively market their services to investors in Hong Kong) is required to obtain a license under the Securities and Futures Ordinance (SFO) and the AMLO.
It is important to note that VATPs have been required to acquire a license in Hong Kong going back to June 1, 2023. For companies, the y must either be registered as an overseas company through the Companies Registry of Hong Kong or directly incorporated in Hong Kong.
There are several requirements as it pertains to VATPs. They can only list high-liquidity tokens that have been pre-approved by the SFC. They must have sufficient liquid capital and paid-up share capital. They must also have responsible offers that the SFC deems “fit and proper.” Finally, VATPs are required to file an annual return through the Companies Registry while maintaining strong custodial measures in order to keep user assets safeguarded.
For virtual assets, there is no capital gains tax. That said, anyone who trades on a regular basis could be required to pay income tax should it be deemed income. It is also important that licensees follow strict know-your-customer (KYC) and AML procedures, including transaction monitoring, regular audits, risk management, adherence to the Travel Rule, and sanctions compliance.
Regulatory Framework in Hong Kong
A major piece of Hong Kong’s regulatory framework falls under the Anti-Money Laundering Ordinance. Under the new licensing regime, entities considered centralized virtual asset trading platforms operating within Honk Kong are required to apply for a license from the SFC under either the AMLO Dual License Arrangement or the SFO. The most important guidelines are as follow:
Anti-Money Laundering
There is a guideline on anti-money laundering and counter-financing of terrorism. There is a chapter within on the regulation of virtual assets while also providing guidance on regulatory requirements, standards for assessing risks, and money laundering risks.
Virtual Asset Trading Platform Operators
There is also a section offering guidelines for platform operators (licensed under AMLO and/or SFO) that provide clarification on the requirements and standards expected of Hong Kong’s VA Platforms when it comes to safe custody of assets, avoidance of conflicts of interest, cybersecurity, segregation of client assets, and investor protection requirements.
Prevention of Money Laundering and Terrorist Financing
This set of guidelines, issued by the SFC for Associated Entities of Licensed Corporations and SFC-Licensed Virtual Asset Service Providers, creates regulatory and statutory requirements relevant to counter-financing terrorism and anti-money laundering. This guidelines is meant for associated entities that aren’t considered authorized financial institutions, plus their staff and officers.
Impacts on the Industry
Though the ultimate goal is to keep Hong Kong as a crypto leader on a global scale, there are impacts to these updated licensing requirements. For instance, the licensing regime has already seen a big increase in staff cost budgets.
Those alone can have major impacts on Hong Kong, mostly positive. For starters, it will boost trust in the Hong Kong crypto sector while also cementing Hong Kong as a APAC and global crypto leader. Investors who trust the sector would be more likely to invest in financial institutions as a result.
An expansion of crypto products and services could come as well. Success because of these licensing requirements could encourage other jurisdictions around the world to provide better regulation on virtual assets.
That said, there could be some downsides. For instance, by only offering SFC-approved tokens, some investors could opt to go through unapproved methods or invest in other regions. Increased barriers and costs related to licensing could to market consolidation from larger platforms.
Hong Kong Regulators
Perhaps the biggest and most important regulator in Hong Kong is the Securities and Futures Commission (SFC). The SFC gets its remedial, investigative, and disciplinary powers from the Securities and Futures Ordinance (SF). Regulations are set and enforced by the organization. It also provides licenses, investigates suspicious cases, and more.
The Hong Kong Monetary Authority (HKMA) is the central banking institution in Hong Kong. Partnered with the SFC, the HKMA has a hands-on approach when it comes to handling virtual assets and virtual asset service providers. They have jointly issued updated guidelines regarding entities that are regulated by the SFC when it comes to virtual asset-related situations within Hong Kong.
Getting Licensed in Hong Kong
As of June 1, 2023, crypto-related businesses are required to get a license from the SFC. Applicants must follow specific regulations in order to become licensed for business in Hong Kong.
For starters, an applicant must show that they intend to provide services while passing a ‘fit and proper’ test. The test involves financial standing, performance history, criminal background checks, reputation, experience, and financial integrity, among other things.
Each organization must have at least two Responsible Officers also deemed to be fit and proper as it pertains to providing VA service. Finally, each organization must lodge for approval of premises that will be used for keeping documents and/or records.
Penalties for Offenses
Operating without a license can cost a business up to 5,000,000 HKD ($643K USD). Senior management could face up to seven years in prison. Continuing offense can see a penalty of 100,000 HKD ($12,900 USD) for each day that the offense persists. These penalties apply as well if an unlicensed person markets VA services provided outside of Hong Kong to the public of Hong Kong.
Being non-compliant to CTF/AMF requirements results in a fine of 1,000,000 HKD ($129K USD). Responsible officers could face up to two years in prison if convicted. There are a variety of disciplinary actions as well, such as reprimand, pecuniary penalty, suspension or revocation of licenses, and more.
Following these guidelines is imperative to prevent major penalties and fines, plus potential imprisonment for Responsible Officers. There is even more related to these licensing requirements, so business entities would be wise to take a deeper dive.
