1. Hong Kong's Web3 Hub Strategy
In October 2022, the Hong Kong government issued a landmark policy statement declaring its intention to develop Hong Kong into a global virtual asset hub. This represented a decisive break from China's 2021 crypto ban and signalled Hong Kong's intention to leverage its unique "one country, two systems" status to attract the global blockchain industry.
The policy shift was motivated by competitive pressure from Singapore, Dubai, and other jurisdictions actively courting the crypto industry, as well as recognition that virtual assets represent a significant opportunity for Hong Kong's financial sector. The government has backed the strategy with concrete regulatory development, budget support for Web3 initiatives, and high-level political commitment.
The centrepiece of the regulatory overhaul was the introduction of a mandatory licensing regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) for virtual asset trading platforms, which came into force in June 2023. Previously, Hong Kong's SFC had operated a voluntary opt-in licensing regime for crypto exchanges under its securities law framework — the new AMLO-based regime is mandatory for all platforms operating in or targeting Hong Kong.
2. The Mandatory VASP Licensing Regime
Since June 1, 2023, any person operating a virtual asset trading platform (VATP) in Hong Kong or actively marketing to Hong Kong investors must be licensed by the SFC under the AMLO. The regime applies to centralised exchanges that facilitate trading of virtual assets — whether those assets are classified as securities or not.
Key features of the mandatory VASP regime:
- ▸Mandatory for all platforms: Unlike the previous opt-in regime, all VATPs with a Hong Kong nexus must be licensed. There is no exemption for platforms that only trade non-securities tokens.
- ▸Transitional period: Platforms already operating in Hong Kong before June 1, 2023 were allowed a transitional period to apply for licensing. This transitional window has gradually closed, with the SFC taking enforcement action against platforms that failed to apply.
- ▸Dual licensing possible: For exchanges that trade both securities-type and non-securities virtual assets, a dual licence covering both the AMLO VASP regime and the SFC's Type 1 (dealing in securities) and Type 7 (automated trading services) regulated activity categories is available.
3. SFC Licensing Requirements
To obtain a VATP licence from the SFC, applicants must meet extensive requirements:
Fitness and Properness
Management, directors, and significant shareholders must be fit and proper persons, with no criminal history related to financial crimes and demonstrable experience in financial services or technology.
Financial Resources
Minimum paid-up share capital of HKD 5 million and liquid capital of at least HKD 3 million must be maintained at all times.
Asset Custody
At least 98% of client virtual assets must be kept in cold storage. Hot wallets may hold no more than 2% of client assets. Insurance or similar compensation arrangements must cover potential losses from hot wallet exposure.
Token Admission Criteria
Licensed exchanges must maintain a token admission policy. Only tokens that meet the SFC's admission criteria — including market capitalisation, liquidity, and regulatory status — may be listed. For retail access, tokens must additionally be included in at least two "accepted indices."
4. Retail Investor Access
One of the most significant aspects of Hong Kong's new regime is its explicit permission for retail investors to trade virtual assets on licensed platforms — a reversal of the previous professional-investor-only policy.
Licensed VATPs that wish to serve retail clients must satisfy additional requirements beyond the baseline licence conditions:
- ▸Conduct knowledge assessments for retail clients to ensure they understand the risks of virtual asset trading
- ▸Implement suitability assessment for derivative products
- ▸Provide prominent risk disclosures including loss scenarios
- ▸Maintain a client onboarding process that documents risk appetite and investment experience
The SFC has also specified that retail-accessible tokens must be large-cap assets included in at least two qualifying indices — effectively limiting retail access to Bitcoin and Ether in the initial phase, with the possibility of expanding to other tokens as the market matures.
5. Stablecoin Regulatory Framework
Hong Kong has been developing a dedicated stablecoin regulatory regime in parallel with its VATP licensing framework. The Hong Kong Monetary Authority (HKMA) — rather than the SFC — leads stablecoin regulation, reflecting the monetary policy implications of fiat-referenced stablecoins.
Key elements of the proposed Hong Kong stablecoin framework include:
- ▸Issuer licensing: Only HKMA-licensed entities may issue fiat-referenced stablecoins (FRS) in Hong Kong or market them to Hong Kong investors. The licencing sandbox opened in 2024 with several major banks and fintech firms participating.
- ▸100% reserve requirement: FRS issuers must maintain high-quality liquid assets equal to 100% of the outstanding supply. Reserve assets must be held with authorised institutions in Hong Kong.
- ▸Redemption rights: Stablecoin holders must have the right to redeem at par at any time. This provision directly addresses the issues that caused the Terra/LUNA collapse.
6. AML/CFT Obligations
Hong Kong's virtual asset AML framework is governed by the AMLO, which was amended specifically to bring VATPs within its scope. Licensed platforms must implement:
- ▸CDD and enhanced due diligence: Full customer identification and verification for all clients. Enhanced due diligence for PEPs and high-risk transactions above specified thresholds.
- ▸Travel Rule compliance: Hong Kong implemented the FATF Travel Rule in 2023, requiring virtual asset transfers above HKD 8,000 to be accompanied by originator and beneficiary information.
- ▸Suspicious transaction reporting: Mandatory reporting of suspicious transactions to the Joint Financial Intelligence Unit (JFIU). Failure to report is a criminal offence.
7. Licensed and Approved Exchanges
As of 2026, the SFC has granted full VATP licences to a growing number of exchanges. HashKey Exchange and OSL Exchange were the first to receive licences under the new mandatory regime, having previously operated under the voluntary opt-in scheme. Several global exchanges including OKX HK (a dedicated Hong Kong entity) and others have also obtained or applied for licences.
The SFC maintains a public register of licensed VATPs and also publishes a list of "suspicious" platforms — unlicensed exchanges that have been targeting Hong Kong investors — to warn consumers. This two-sided enforcement approach (certifying compliant platforms and warning against non-compliant ones) is a distinctive feature of Hong Kong's regulatory communication strategy.