The Securities and Futures Commission (SFC) of Hong Kong has taken a significant step forward in regulating the virtual asset sector by granting licenses to four virtual asset trading platforms under its expedited licensing process. This marks a pivotal development in Hong Kong’s ambition to become a global hub for digital finance.
Newly Licensed Platforms Strengthen Market Infrastructure
On December 18, the Hong Kong SFC officially issued licenses to the following four applicants:
- Yun Account Greater Bay Area Technology (Hong Kong) Limited
- DFX Labs Company Limited
- Hong Kong Digital Asset Exchange Group Limited
- Thousand Whales Technology (BVI) Limited
These new additions bring the total number of licensed virtual asset trading platforms in Hong Kong to seven, following earlier approvals for platforms like OSL Digital Securities Limited. The licensing milestone reflects the SFC’s structured and risk-based approach to integrating digital asset platforms into the regulated financial ecosystem.
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A Three-Phase Licensing Strategy Ensures Compliance and Stability
The SFC has adopted a clear “three-step” strategy to manage the influx of licensing applications, ensuring both regulatory rigor and operational readiness.
Step 1: Risk-Based On-Site Inspections and Corrective Actions
All applicants deemed “treated as licensed” have undergone comprehensive on-site inspections focused on identifying risks related to investor protection, cybersecurity, and anti-money laundering (AML) compliance. Following these assessments, each platform must submit a corrective action plan addressing the SFC’s findings.
Step 2: Conditional Licensing with Restricted Operations
Once the SFC approves the corrective plan, the applicant receives a conditional license. Under this phase, platforms may operate within a limited scope—such as restricted trading pairs or custody services—but only after completing required remediations and passing third-party penetration testing and vulnerability assessments.
Step 3: External Evaluation and Full Operational Clearance
To lift operational restrictions, platforms must undergo a second-phase evaluation conducted by independent external experts. This assessment verifies that revised policies, procedures, systems, and controls meet regulatory standards. The SFC supervises this process through a tripartite agreement involving the platform, the evaluator, and itself. Upon successful completion, business limitations are removed.
This phased model ensures that platforms not only meet technical requirements but also demonstrate sustainable compliance practices.
Clear Roadmap Enhances Transparency and Trust
In a December 18 circular, the SFC outlined a transparent licensing roadmap to guide applicants through the process. Key elements include:
- Mandatory third-party audits: Penetration tests and vulnerability assessments must be carried out by independent firms, with results submitted to the SFC.
- Management accountability: Platform executives must ensure all medium- to high-risk issues identified during testing are fully addressed.
- Ongoing compliance obligations: Any major changes to policies or procedures must be promptly reported to both the SFC and the external evaluator.
- Direct verification requirement: The second-phase evaluation must involve direct validation of controls, culminating in a formal opinion signed by a practicing accountant.
The tripartite agreement framework ensures alignment between regulators, platforms, and auditors, reducing ambiguity and accelerating approvals.
Why Is Hong Kong Embracing Virtual Assets?
Virtual assets have become a strategic priority for Hong Kong’s financial regulators and policymakers. Speaking at the Hong Kong FinTech Week 2024, Executive Director of Intermediaries Regulation at the SFC, Mr. Calvin Yeung, highlighted three key drivers behind the market’s growth:
- Talent and innovation: A surge in skilled professionals has fueled rapid advancements in blockchain and decentralized technologies.
- Economic potential: The industry contributes significantly to GDP through trading volume, investment flows, and job creation.
- Youth engagement: Crypto traders are predominantly in their 20s—much younger than traditional stock market participants—indicating long-term market sustainability.
“Virtual asset trading volumes are too large to ignore,” Yeung noted. “They represent both opportunity and risk—demanding robust regulation and investor education.”
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Balancing Innovation with Investor Protection
The SFC emphasizes that the future of virtual assets lies in regulated markets where innovation coexists with investor safeguards. Its guiding principle—“same business, same risk, same rules”—ensures that digital asset platforms adhere to standards equivalent to those governing traditional financial institutions.
Yeung observed two positive global trends reinforcing this vision:
- Increased regulatory scrutiny worldwide: Authorities across jurisdictions are enforcing stricter rules, including fines and criminal charges for misconduct. This pressures market players to choose between legitimate operations or facing legal consequences.
- Convergence of traditional finance and Web3: Financial institutions are increasingly entering the virtual asset space, bringing mature compliance frameworks in AML, conflict of interest management, client suitability, and secure custody.
“We believe the market will naturally gravitate toward regulated, resilient platforms,” Yeung said. “History doesn’t repeat itself, but it often rhymes—today’s virtual asset market resembles the early days of securities trading.”
Looking Ahead: Building a Sustainable Ecosystem
Licensing is just the beginning. As more platforms enter the regulated space, the SFC plans to establish a formal advisory group in early 2025 comprising senior representatives from all licensed operators. This initiative will facilitate ongoing dialogue on investor protection, technological evolution, and market development priorities.
Hong Kong aims not only to regulate but also to nurture a thriving digital asset ecosystem—one that balances innovation with integrity, attracting global capital while safeguarding public trust.
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Frequently Asked Questions (FAQ)
Q: What does it mean for a platform to be 'treated as licensed'?
A: Platforms classified as “treated as licensed” were already operating in Hong Kong before full regulation took effect. They are undergoing an accelerated review process to achieve full compliance and official licensing.
Q: How many virtual asset platforms are currently licensed in Hong Kong?
A: As of December 2025, there are seven licensed virtual asset trading platforms under the Hong Kong SFC.
Q: What is the purpose of the second-phase evaluation?
A: The second-phase evaluation ensures that a platform’s updated policies, systems, and controls are properly designed and implemented according to regulatory guidelines, particularly regarding cybersecurity and investor protection.
Q: Who conducts the penetration testing and vulnerability assessments?
A: Independent third-party experts, typically cybersecurity firms or auditors, perform these tests. Results must be satisfactory before a platform can begin limited operations.
Q: Can licensed platforms offer all types of crypto assets?
A: Initially, their offerings may be restricted. Only after passing all evaluations and gaining full approval can they expand their product suite in line with SFC guidelines.
Q: Is retail investor access allowed on licensed platforms?
A: Yes—but under strict conditions. Platforms must meet enhanced requirements around risk disclosure, portfolio segregation, and liquidity management before serving retail clients.
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