The financial landscape in Hong Kong is undergoing a transformative shift as traditional brokerage firms increasingly integrate virtual asset services into their offerings. A recent research report by DAIWA Capital Markets highlights a pivotal development—Cathay Securities International (01788-HK) has received regulatory approval from the Securities and Futures Commission (SFC) to upgrade its Type 1 regulated activity license. This enhancement allows the firm to offer virtual asset trading services through integrated account arrangements with SFC-licensed virtual asset trading platforms (VATPs). The move marks a significant milestone in the convergence of traditional finance and digital assets, reinforcing confidence across the sector.
Regulatory Green Light Fuels Market Optimism
The approval has sparked a positive reaction in the market, with the broader brokerage sector experiencing a notable uptick in share prices. Investors are particularly optimistic about the implications of established financial institutions offering Bitcoin, Ethereum, and stablecoin trading services. By leveraging their extensive client bases and trusted brand reputations, traditional brokers can significantly expand access to cryptocurrency markets—bridging the gap between conventional investors and digital assets.
DAIWA maintains a "Buy" rating on OSL Group (00863-HK), setting a target price of HK$15. The rationale? As more brokers adopt virtual asset services via partnership models, demand for compliant infrastructure will rise—directly benefiting licensed VATPs like OSL and Hashkey.
This regulatory evolution reflects Hong Kong’s growing support for a structured and secure digital asset ecosystem, encouraging institutional participation while safeguarding investor interests.
Why Upgrading Licenses Is a Strategic Shortcut
Compared to applying for a full VATP license—a rigorous and capital-intensive process—upgrading an existing Type 1 license presents a more accessible pathway for traditional brokers. It enables them to offer crypto trading without building proprietary custody or trading infrastructure from scratch. Instead, they collaborate with licensed platforms that already meet stringent SFC requirements for security, anti-money laundering (AML), and risk management.
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This model accelerates time-to-market and reduces operational complexity, making it an attractive option for firms aiming to stay competitive in the evolving wealth management space. Given Hong Kong’s increasingly supportive policy environment, DAIWA expects more investment banks and brokerage houses to pursue similar license upgrades in the near term.
Expanding the Virtual Asset Ecosystem
Under current SFC guidelines, brokers providing virtual asset services must do so through integrated accounts linked to licensed VATPs. This requirement creates a symbiotic relationship: brokers gain access to compliant crypto offerings, while VATPs benefit from expanded user acquisition channels and increased trading volume.
As adoption grows, platforms like OSL stand to gain not only in terms of client inflows but also in enhanced credibility as preferred partners for regulated financial institutions. This trend underscores a broader shift toward institutional-grade digital asset solutions that align with global compliance standards.
Industry Precedents and Future Outlook
Futu Holdings offers a compelling case study. Through its subsidiary PantherTrade, the company obtained formal VATP licensing in January 2025 and had already begun offering cryptocurrency trading services in 2024. This proactive approach highlights how fintech-forward firms are positioning themselves at the forefront of the digital asset revolution.
Looking ahead, DAIWA anticipates that other major players may follow suit. For instance, Bright Smart Securities (01428-HK), backed by Ant Group, could seek a Type 1 license upgrade to become a key distribution channel for Ant International’s planned Hong Kong dollar-pegged stablecoin.
Such developments could significantly boost the adoption rate and utility of local stablecoins. With brokers integrating these assets into mainstream portfolios, use cases may expand beyond speculation into areas like cross-border payments, yield-bearing products, and tokenized real-world assets.
Core Keywords Driving Market Trends
The evolving narrative around virtual assets in Hong Kong centers on several key themes:
- Virtual asset services
- SFC-licensed platforms
- Type 1 license upgrade
- Bitcoin and Ethereum trading
- Stablecoin adoption
- Institutional crypto integration
- Regulated digital asset ecosystem
These keywords reflect both investor interest and regulatory momentum, forming the backbone of search intent for professionals tracking fintech innovation in Asia.
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Frequently Asked Questions (FAQ)
Q: What does upgrading a Type 1 license allow a broker to do?
A: It permits licensed brokers to offer virtual asset trading services to clients by partnering with SFC-approved platforms, enabling integrated account functionality without requiring full VATP licensing.
Q: Why is OSL Group seen as a beneficiary of this trend?
A: As one of the few SFC-licensed VATPs, OSL is well-positioned to serve as a backend infrastructure partner for traditional brokers looking to launch crypto services—driving higher transaction volumes and user growth.
Q: How does this impact retail investors?
A: Investors gain safer access to digital assets through familiar, regulated financial institutions, reducing counterparty risk and increasing trust in crypto investments.
Q: Will more Hong Kong brokers enter the crypto space?
A: Yes—given the regulatory clarity and growing demand, DAIWA expects a wave of license upgrades among major brokerage firms over the next 12–24 months.
Q: What role do stablecoins play in this ecosystem?
A: Stablecoins enhance liquidity and enable seamless value transfer within digital portfolios. Localized versions, such as a potential HKD-pegged coin, could drive wider financial inclusion and cross-border efficiency.
Q: Is self-custody still an option under this model?
A: Not directly through the broker. Clients typically hold assets on the partnered VATP’s platform, which manages custody under strict regulatory oversight—prioritizing security over self-control.
The Road Ahead for Institutional Crypto Adoption
Hong Kong’s strategic push to become a global hub for virtual assets is gaining traction. With clear regulations, active SFC oversight, and growing collaboration between traditional finance and blockchain-native platforms, the city is setting a benchmark for responsible innovation.
As more brokers embrace virtual asset services through compliant frameworks, the line between legacy finance and decentralized ecosystems continues to blur—in favor of a more inclusive, transparent, and efficient financial future.
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