Hong Kong continues to refine the manner in which cryptoassets and activities are regulated. In 2019, the Hong Kong Securities and Futures Commission (SFC) commenced an opt-in licensing regime for virtual asset trading platforms (Opt-in Regime).[1]    In 2020, the Financial Services and the Treasury Bureau (FSTB) of the Government of the Hong Kong Special Administrative Region launched a consultation (Consultation) on proposals to enhance anti-money laundering and counter-terrorist financing (AML/CTF) regulation in Hong Kong under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).[2]  One of the key proposals includes a new wide-ranging licensing regime for virtual asset services providers (VASPs), which will also be regulated by the SFC. The changes are amongst others intended to align Hong Kong’s regulations with the latest requirements and recommendations of the Financial Action Task Force.

Whilst the final approach will need to be determined following release of the Consultation conclusions, the key proposals in the Consultation include the following:

What products and services will be regulated and require a license?

A new regulated activity (Regulated VA Activity) will cover the operation of a trading platform (VA Exchange) that:

  • is operated for the purpose of allowing an offer or invitation to be made to buy or sell any virtual assets (VA) in exchange for any money or any VA; and
  • comes into custody, control, power or possession of, or over, any money or any VA at any point in time during its course of business.

Subject to various exemptions, VA is proposed to be defined as a digital representation of value that:

  • is expressed as a unit of account or a store of economic value;
  • functions or is intended to function as a medium of exchange accepted by the public as payment for goods or services or for the discharge of a debt, or for investment purposes; and
  • can be transferred, stored or traded electronically.

Do the licensing requirements only apply when the regulated activity is undertaken in Hong Kong?

Licensing requirements will apply in the following circumstances:

  • conducting the Regulated VA Activity in Hong Kong; or
  • actively marketing (whether in Hong Kong or from elsewhere) to the public of Hong Kong a Regulated VA Activity or a similar activity elsewhere (i.e., services associated with a VA Exchange).

Will there be licensing conditions imposed?

Licensing conditions and regulatory requirements may be imposed, which will cover areas including:

  • serving professional investors only i.e. no retail clients allowed (at the initial stage)
  • adequate financial resources
  • proper corporate governance structure
  • prudent and sound business operations
  • appropriate risk management policies and procedures
  • proper segregation and management of client assets
  • robust VA listing and trading policies
  • financial reporting and disclosure
  • prevention of market manipulation and abusive activities
  • prevention of conflicts of interest

These proposed changes, particularly the restriction of services to professional investors could have a significant impact upon the market and we will continue to observe the outcome of the Consultation.

You can read more in our full guide – Crypto around the World – where we take a look at cryptoasset regulations across various jurisdictions. The guide follows a questionnaire format, with twenty questions. This revised edition contains new entries for Hong Kong and Spain.

[1] For a more detailed discussion of the Opt-in regime please refer to our earlier alert available through this link.

[2] https://www.fstb.gov.hk/fsb/en/ppr/consult/doc/consult_amlo_e.pdf


Karen Man is a partner in Baker McKenzie’s Financial Services group, leading the non-contentious Financial Services Regulatory practice. Her clients include global, Chinese and local banks, fund managers, brokers/dealers, money service operators and fintech firms. Karen is admitted to practice in Hong Kong, the UK, and Australia.


Grace Fung is a partner in Baker McKenzie’s Financial Services group. Her practice focuses on advising banks, asset managers, brokers, sponsors, corporate finance advisors, payment services providers and Fintech companies on a wide variety of regulatory, compliance and corporate law matters.


Aaron Dauber is a Knowledge Lawyer in Baker McKenzie's Financial Services Group. A former in-house counsel responsible for Asia Pacific in a United States of America based global systemically important bank (G-SIB), he has experience in areas including establishing and operating various cross-border financial services businesses, product development, general corporate and regulatory dispute resolution. Aaron has worked in Australia, has over 17 years of experience in Asia gained in Hong Kong and Tokyo and is admitted to practice in Australia, the United Kingdom and is a Registered Foreign Lawyer in Hong Kong.