Hong Kong has officially positioned itself as a global hub for virtual asset development. With the recent release of the Policy Statement on the Development of Virtual Assets in Hong Kong by the Financial Services and Treasury Bureau (FSTB), market confidence has surged. Clear regulatory frameworks are now emerging, offering a transparent path for businesses aiming to operate legally in this fast-evolving digital economy.
This article dives deep into the licensing requirements for virtual asset platforms in Hong Kong. We’ll explore the nature of virtual assets under Hong Kong law, clarify which activities are regulated, and detail the essential licenses required for compliance — all while helping you understand how to navigate this robust yet accessible regulatory environment.
👉 Discover how to start your compliant virtual asset business in Hong Kong today.
Understanding Virtual Assets Under Hong Kong Law
Before discussing licenses, it’s crucial to define what constitutes a virtual asset in Hong Kong. According to the Securities and Futures Commission (SFC), a virtual asset is:
“A digital representation of value that can be digitally traded or transferred and used for payment or investment purposes.”
This broad definition includes:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Utility tokens
- Security-backed tokens
- NFTs and other digital collectibles
- Any digital commodity or encrypted data with value
Importantly, not all virtual assets fall under SFC regulation. The key distinction lies in whether the asset qualifies as a security or futures contract under the Securities and Futures Ordinance (SFO).
The SFC explicitly stated in its November 2019 Position Paper on Regulation of Virtual Asset Trading Platforms that:
“The SFC does not have the authority to license or regulate platforms that only trade non-security virtual assets.”
In practical terms:
- Platforms offering security-tokenized digital assets (i.e., tokens representing shares, dividends, or profit rights) are subject to SFC oversight.
- Platforms dealing solely in non-security tokens (e.g., pure NFT marketplaces or utility tokens without investment features) are currently outside the SFC’s jurisdiction.
Thus, if your platform enables trading of tokenized securities — even partially — you must comply with Hong Kong’s financial licensing regime.
Key SFC Licenses for Virtual Asset Businesses
Hong Kong regulates financial activities through a 12-category licensing system under the SFO. While not all categories are active, several are directly relevant to virtual asset operations.
Here’s a breakdown of the most important licenses:
Type 1 License: Securities Dealing
Permits firms to conduct securities trading, including buying, selling, and underwriting. For virtual asset platforms, this license is mandatory if trading involves security tokens.
Type 4 License: Advice on Securities
Allows firms to provide investment advice related to securities. If your platform offers research, ratings, or recommendations on tokenized assets, this license becomes necessary.
Type 7 License: Automated Trading Services
Required for operating an electronic trading platform — essentially any system that matches buy and sell orders automatically. This is critical for centralized crypto exchanges.
Type 9 License: Asset Management
Needed if your business manages investment portfolios involving virtual assets. This applies whether you’re running crypto hedge funds, index funds, or discretionary trading accounts.
💡 Note: There are “large” and “small” versions of some licenses. For example, a "small Type 9" license only permits private fund management, not public offerings.
While Types 1, 4, 7, and 9 are central to virtual asset operations, they must be obtained by a registered legal entity in Hong Kong — individuals or decentralized autonomous organizations (DAOs) cannot hold licenses.
👉 Learn how to structure your company for SFC licensing eligibility.
Which Licenses Do You Actually Need?
The answer depends on your business model.
Scenario 1: Centralized Exchange Offering Security Tokens
If your platform allows trading of at least one security-type virtual asset (e.g., equity-linked tokens), you must obtain:
- Type 1 License: To legally facilitate securities transactions.
- Type 7 License: To operate an automated order-matching system.
This combination mirrors the licensing structure of OSL Digital Securities Limited — the first fully licensed virtual asset exchange in Hong Kong.
Scenario 2: Asset Management Firm Handling Crypto Portfolios
If you manage client portfolios containing virtual assets classified as securities:
- Type 9 License is required.
- If the portfolio includes non-security tokens (e.g., Bitcoin), the SFC may impose additional conditions but will still regulate under Type 9.
Additionally, if clients receive personalized investment advice:
- A Type 4 License should also be secured.
Scenario 3: Hybrid Platform Offering Trading + Advisory + Fund Management
For full-service platforms combining exchange functions, advisory services, and fund management:
- Types 1, 4, 7, and 9 may all be necessary.
- Each license requires separate application, compliance infrastructure, and ongoing audits.
⚠️ Important: Simply acquiring multiple licensed entities won’t satisfy SFC requirements. You cannot "stitch together" different license holders under one operational umbrella unless they’re consolidated under a single regulated entity. The SFC evaluates the entire business operation, not just paper ownership.
Currently, direct acquisition of an existing licensed firm is extremely difficult due to strict fit-and-proper tests and regulatory scrutiny. Most companies must establish a new Hong Kong-incorporated entity and apply for licenses from scratch.
Regulatory Stability: Open-Ended Licensing Model
One major advantage of Hong Kong’s framework is its open-ended licensing approach, confirmed in the FSTB’s 2021 consultation conclusions.
Unlike jurisdictions requiring annual renewals or frequent re-approval:
- Once granted, an SFC license remains indefinitely valid, provided the holder remains compliant.
- There is no automatic expiration date.
- Ongoing supervision focuses on risk-based monitoring rather than routine re-certification.
This long-term stability encourages significant investment in technology and compliance infrastructure — essential for building scalable, trustworthy platforms.
Who Can Trade? Access Limited to Professional Investors
Even with full licensing, there’s a crucial restriction: only professional investors can use licensed virtual asset platforms in Hong Kong.
The criteria are stringent:
- Individuals: Must have at least HK$8 million (≈ USD 1 million) in investment portfolios.
- Corporations/Partnerships: Need either HK$8 million in investable assets or HK$40 million in total assets.
- Trusts: Require at least HK$40 million in net assets.
Retail investors are currently excluded from trading on licensed platforms. However, this could change as the market matures and regulatory safeguards strengthen.
Experts predict that retail access will gradually open, especially with advancements in custody solutions, investor education, and anti-fraud mechanisms.
Frequently Asked Questions (FAQ)
Q1: Do I need a license if I only trade non-security tokens like Bitcoin or NFTs?
A: No — platforms dealing exclusively in non-security virtual assets (e.g., Bitcoin-only exchanges or NFT marketplaces) are not regulated by the SFC. However, other laws (e.g., anti-money laundering rules) may still apply.
Q2: Can I operate remotely from outside Hong Kong with an SFC license?
A: No. The licensed entity must be incorporated in Hong Kong and maintain local offices, senior management presence, and compliance systems within the territory.
Q3: How long does it take to get an SFC license?
A: Typically 6 to 12 months, depending on application completeness, business complexity, and responsiveness during review.
Q4: Is it possible to get all four key licenses at once?
A: Yes — firms like OSL have secured multiple licenses simultaneously. However, each requires separate documentation, capital requirements, and internal controls.
Q5: Are decentralized exchanges (DEXs) regulated in Hong Kong?
A: Not currently. The SFC regulates centralized platforms with identifiable operators. Fully decentralized protocols without a central controlling party fall outside current enforcement scope — but this may change as global standards evolve.
Q6: What happens if my license is revoked?
A: Revocation typically follows serious violations (e.g., fraud, AML failures). The firm loses legal authority to operate and may face penalties or criminal charges.
👉 See what it takes to build a compliant team and infrastructure for SFC approval.
Final Thoughts: A Strategic Gateway for Global Crypto Firms
Hong Kong’s clear regulatory roadmap makes it one of the most attractive jurisdictions for compliant virtual asset businesses in Asia. With strong legal foundations, indefinite licensing, and support from top-level policymakers, the city is well-positioned to become a leading financial gateway for digital assets.
While entry barriers remain high — especially regarding capital, expertise, and investor access — these reflect Hong Kong’s commitment to safety and integrity. For serious operators aiming for long-term growth, the effort pays off through credibility, stability, and access to international markets.
As regulations continue evolving in 2025 and beyond, early movers who establish compliant operations now will be best placed to benefit when retail participation eventually opens.
The future of finance is digital — and Hong Kong is building the bridge.