Crypto License in Hong Kong
Hong Kong continues to be one of the world’s top financial hubs and has emerged as one of the top places for regulated crypto and virtual asset businesses to do business in Asia. Following the implementation of a formal licensing framework for Virtual Asset Trading Platforms (“VATPs”) and an ongoing approach to licensing regimes for brokers, custodians, and tokenised investment services, the jurisdiction is clearly positioning itself as a regulated and institutionally-focused crypto jurisdiction.
This jurisdiction is mostly appropriate for businesses aiming to target the Asian market, those seeking institutional capital, tokenisation ventures, crypto brokerage, and complex fintech structures needing high credibility, a structured approach to compliance and a strong international financial presence.
The multiple possible paths in Hong Kong depending on the business type distinguishes it from many offshore jurisdictions. Therefore different businesses operating in the crypto space may require one of the below license types depending on the activities it intends to undertake: exchange, brokerage, distribution, custody, trustee etc.
Legalaes helps clients by assessing the right path of licensing, structuring the business model, overseeing the establishment procedures in the jurisdiction, preparing in-house AML/CFT materials and undertaking the entire regulatory application with the relevant local legal and compliance support providers.
Regulatory Overview
At present, Hong Kong does not have a unified crypto license regime. Virtual asset activities will be subject to different types of regulation based on the type of service that the business provides.
Depending on the business model, a virtual asset business may be under the supervision of the following bodies:
- Securities and Futures Commission (“SFC”)
- Companies Registry (TCSP licensing regime)
- Hong Kong Monetary Authority (“HKMA”)
- Customs and Excise Department (certain money service activities)
In most circumstances, the SFC will be the primary regulator for crypto exchanges, and investment related virtual asset activities. Hong Kong introduced a licensing regime for Virtual Asset Trading Platform (“VATP”) operators under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which came into effect on 1 June 2023.
The activity of operating a centralized crypto exchange within Hong Kong or actively soliciting services to Hong Kong investors generally require the authorization from the SFC.
However, not all crypto businesses must acquire a VATP license. In addition, if the virtual asset business provides custody, brokerage, advisory, tokenisation or asset management activities, alternative ways of conducting business exist.
Therefore, the proper license pathway should always be assessed by the business model, customer on-boarding process, custody, trading nature of the business and the target investors.
Categories of Crypto Licenses in Hong Kong
| License / Authorization | Regulator | Typical Activities | Suitable For | Estimated Time Frames |
|---|---|---|---|---|
| TCSP + Trust Company | Companies Registry | Custody, Safekeeping, Trustee Services | Custodians, Family Offices | 1-3 months |
| Type 1 (Dealing in Securities) with VA Conditions | SFC | Crypto Brokerage, Token Distribution, Trade Execution | Brokers, OTC Providers | 7-9 months |
| Type 9 (Asset Management) | SFC | Crypto Funds, Portfolio Management | Fund Managers, Wealth Managers | 6-12 months |
| VATP License | SFC | Centralized Virtual Asset Trading Platforms | Exchanges | 12-24 months |
| HKMA Stablecoin Regime | HKMA | Fiat-Referenced Stablecoins | Fiat-Referenced Stablecoin Issuers | 6-12 monthss |
Services Allowed:
Based on the licensing pathway pursued, a Hong Kong crypto company is typically able to
carry out the following services:
- Provide wallet and digital asset management services.
- Provide virtual asset trading platform (VATP) services;
- Provide brokerage and transaction execution of virtual assets;
- Provide virtual asset custody and safeguarding solutions;
- Provide management of virtual asset portfolios and funds;
- Provide virtual asset investment advisory services;
- Provide OTC virtual asset transactions;
- Provide the distribution of tokenised investment products, subject to SFC authorisation;
The permitted activities will vary according to the type of license issued, regulatory approvals
given and restrictions imposed by the Hong Kong regulatory authority. For certain services, it
may also be necessary to obtain further authorisations under separate Hong Kong regulatory
regimes.
Overview of Requirements to Obtain a Crypto License in Hong Kong
- A Hong Kong incorporated company to carry on the virtual asset activities.
- A viable business model with clearly documented internal operating procedures and internal compliance controls.
- Shareholder, director and chief person(s) who have integrity and appropriate and adequate professional and financial standing.
- Appointment of appropriate management and compliance officers where prescribed by chosen framework.
- AML/CFT policy and procedures with customer due diligence, sanctions check, transaction monitoring and suspicious transaction reporting controls.
- Governance, risk management and internal controls systems that are appropriate for the proposed business.
- Technology, cybersecurity and asset protection measures to be deployed that are appropriate to the nature of the services to be offered.
- Internal systems capable of customer onboarding, transaction execution, record keeping and regulatory reporting.
- Sufficient financial resources for ongoing operations.
Detailed Requirements for Crypto Licensing in Hong Kong
Licensing Requirements
- Establishing a Hong Kong company: The licensing process usually starts by forming a Hong Kong company to conduct the planned virtual asset activities. The company structure should be appropriate to the chosen licensing route and business model.
- Identifying the suitable licensing framework: The cryptocurrency market in Hong Kong does not have just one licensing framework. The correct route of regulation would depend on what kind of services are provided. It could involve a VATP license, SFC-regulated activities, a custody structure or another framework related to virtual assets.
- Business model and operational structure: There should be a clear business model, describing the intended services to be offered, what sort of clients will be dealt with, how the money flows will be handled, where revenue comes from, arrangements that need to be outsourced, and who is in charge of what in the business.
- AML/CFT Framework and controls: Businesses should be equipped with AML/CFT policies and procedures adequate to the business being run. Generally, this means customer due diligence measures, checks on people involved, tracking of payments, systems for detecting suspicious transactions and ways of record keeping.
- Governance and personnel: Directors, controllers, senior employees and other key people should meet the required fit and proper standards. Further to the relevant license, certain additional functions such as compliance officer or responsible officer might be required.
- Technology and asset protection measures: If the business is in charge of the holding, transferring or management of virtual assets, proper technology systems and procedures must be in place. This would generally involve adequate cybersecurity systems, appropriate wallet security arrangements and controls commensurate with the level of risk associated with the activity.
- Financial resources and banking services: The company will have to demonstrate it is sufficiently capitalized for the services offered, as well as for the ongoing compliance with the regulations. Certain banking services, custody arrangements and safe-keeping procedures may be needed as well, depending on the nature of
the business. - Regulatory application and supporting documents: The application forms are normally accompanied by corporate documentation, compliance policies, business plans, organizational and governance information, financial data and other
supporting documents, as required by the relevant Hong Kong authority. - Continuing compliance requirements: Obtaining a license doesn’t put an end to the job. A licensed firm is typically expected to maintain compliant systems, internal controls, procedures for the AML/CFT policies and frameworks it uses, record keeping procedures and overall readiness on a continuing basis.
- Assessment for specific business models: Each license type depends on specific details such as the services that will be provided, the custody arrangements made, the targeted markets, how clients will be taken on board and the direction of the money flows. The business will have to decide its suitable route of regulation
on the basis of the planned activity, not just by its commercial description.
Personnel Requirements
- Fit and proper requirements and adequate professional and financial background for all directors, shareholders, controllers, senior management.
- Appointing Responsible Officers, Compliance Officers, MLROs, other designated
function holders as necessary according to the selected route of authorization. - Adequate experience and knowledge for the relevant personnel appointed for virtual
asset activities. - Clearly delineated reporting lines, duties and authorities, including proper oversight
structure. - Continuous staff training, awareness measures on compliance to be included in the internal control system.
Onpoing Compliance
- The regulated business should continue to keep its AML/CFT policy and procedures, as well as internal controls, up-to-date.
- Customer due diligence, transaction monitoring, sanction screening and suspicious transaction reporting procedures are kept up to date and in force.
- Internal governance, risk management and compliance arrangement should be
reviewed and updated on a regular basis. - The regulatory filings, notifications and reporting obligation in respect of applicable licensing framework are fulfilled properly.
- The regulated business should maintain adequate records, operational documents and evidences for compliance activities.
- Any substantial changes of business model, ownership structure, management team or
regulated activities may need notification or approval by the regulatory bodies.
Business premises requirements
- A company must have a Hong Kong office, with a presence that would enable the conduct of the intended business activities.
- Business records, documentation and details about customers must be kept and maintained to satisfy regulatory requirements.
- Operations and arrangements must permit regulatory supervision, inspection and continuing compliance requirements, if applicable.
- More operational substance, technology and custody arrangements may be expected to depend on the route of the licensing process chosen.
- Systems must be established for client onboarding, transaction monitoring, record keeping and reporting requirements.
Roadmap to Obtaining a Crypto License in Hong Kong
Jegor Kupratsevits
Head of Fintech
Business Model Analysis
A review of the proposed business model is conducted to ascertain the appropriate licensing pathway for operations. Hong Kong does not operate under a single crypto licensing regime. Depending on the services offered by the proposed business, such as custody, brokerage, asset management, advisory services, or exchange operations, different regulatory frameworks may apply.
Licensing Strategy & Structure Design
After an examination of the business model, the correct regulatory framework can be determined. This may include a VATP license, an SFC-regulated brokerage, advisory or asset management license, a custody structure, or another virtual asset-related regulatory framework depending on the proposed activities.
Company Formation & Corporate Setup
A Hong Kong company is incorporated, and initial corporate structure is put in place which consists of the ownership structure, governance arrangements and the necessary corporate documentation.
Compliance Framework Preparation
The AML/CFT framework and all its attendant policies and procedures, the operational framework and controls are drafted and prepared by the business along with all compliance documentation required depending on the category of license applied for.
Personnel & Operational Setup
All responsible personnel are appointed and the business is ready to establish the operation. Depending on the licensing approach, directors, Responsible Officers, compliance personnel, AML officers and other officers could be appointed.
Application Preparation & Submission
The documentation is assembled into a licensing package and submitted to the relevant Hong Kong regulators with the initial application package generally containing the corporate information, compliance documentation, business plan and other operational related documentations.
Regulatory Review & Clarifications
The regulator reviews the application and may request additional information, clarifications, supporting evidence, or amendments to the submission. Communication with the regulator is maintained throughout the review process until a final decision is reached.
Approval & Business Launch
Once a license has been granted, the business may then proceed with operations under the specified category under which it has been licensed. All necessary compliance obligations need to be continued.
Detailed Timeframes to Obtain a Crypto License in Hong Kong
The exact total time for this process is dictated by which type of license is chosen, how complex your business structure and offerings will be, the availability of qualified staff, and the completeness of your submitted application. The simplest structures, which solely focus on custody, should be significantly less time-consuming from an preparation and regulatory review standpoint compared to regulated brokerage activities, asset management or an exchange operated under SFC supervision.
1. Preparation & Licensing Assessment
Time Frame: 1-2 weeks
At this point, the business plan is evaluated based on the services offered, target market and transaction flow. The most appropriate regulatory route (whether a custody structure, or regulated under one of the SFC’s license types, or a VATP) is determined.
2. Company Formation & Corporate Structuring
Time Frame: 1-3 weeks
A Hong Kong company is established and corporate structures put into place. The business arrangements, control framework and governance are in line with the relevant licensing framework.
3. Compliance Documentation & Application Preparation
Time Frame: 4-8 weeks
The necessary licensing documents such asAML/CFT policy, business plan, governance, risk controls and operational requirements are prepared. The necessary corporate information will be gathered and a suitable business structure designed.
4. Personnel & Operational Setup
Time Frame: 2-6 weeks
Directors, Responsible Officers and the required personnel (e.g., compliance, AML, risk, etc.) are identified. Depending on the complexity of the business, this step will need to include directors, responsible officers, and the necessary compliance personnel.
5. Regulatory Submission & Review
- TCSP + Trust Company: 1-3 months
- SFC regulated activities (Type 1, Type 9): 6-12 months
- VATP: 12-24 months
The documentation is submitted to the regulatory body in Hong Kong for examination. The review process itself can vary significantly depending on which type of license is pursued.
6. Clarifications & Additional Information Requests
Time Frame: 2-8 weeks
During the regulator’s review, further questions may be asked and additional documents submitted may be necessary. The exact timing depends on how comprehensive and precise the original submitted package was, and the quality of the business plan itself.
7. Approval & Operational Launch
Time Frame: 2-4 weeks
The license is issued and the firm can begin taking steps toward its operational launch, which includes acquiring banking services and final regulatory requirements.
Factors affecting time-frames:
- The choice of licensing route (TCSP, regulated activities with SFC, or VATP);
- The complexity of proposed VA business model;
- AML/CFT, governance and compliance documents readiness;
- Responsible Officer, directors and compliance team readiness;
- Amount of queries raised by regulator;
- Banking, custody and operation infrastructure setup;
- Local substantiation and staff working in Hong Kong; and
- The completeness and consistency of the original application package.
- The overall quality and consistency of the application.
Timeframes are indicative estimates based on market practice and project experience. Actual review periods depend on the quality of the application, complexity of the business model, staffing arrangements, regulator queries, and the completeness of supporting documentation
Advantages of Hong Kong for Crypto Projects
01
Established Financial Hub
Hong Kong remains one of the major financial centres in the world, and continues to be a prominent global hub for banking, capital markets and financial services. For crypto businesses this is advantageous because Hong Kong provides a sophisticated financial environment, professional service providers and a recognised jurisdiction for investors, institutions and counterparties alike around the globe.
02
Specific Regulatory Framework
Hong Kong provides a dedicated regulatory framework for virtual asset businesses, allowing
companies to enjoy legal certainty in relation to its licensing requirements, compliance obligations and regulatory expectations. This facilitates founders of crypto businesses to structure their projects for long-term growth within a formal framework.
03
Multiple licensing structures
A regulated entity incorporated in Hong Kong may also facilitate the expansion plans of a crypto business. Whether you aim to raise funding from investors, scale up business operations or access new markets or develop new additional services under license, Hong Kong offers flexibility to help support the long-term development of your crypto business.
04
Gateway to Asian Markets
International businesses often use Hong Kong as an entry point into Asia. Obtaining a regulated presence in Hong Kong may provide you access and opportunities to further scale up your business operations across the continent whilst working within an established regulated jurisdiction that both institutions and professionals would readily interact with.
05
Institutional digital asset operations
The Hong Kong regulatory framework is ideal for businesses whose primary customer base
are professionals, family offices, funds and institutional counterparties. Hong Kong has
developed relevant regulatory frameworks for institutional participation in trading, custody,
asset management and tokenisation of assets.
.
06
Continuous development
Hong Kong government and regulators continually pursue the development of digital assets through various initiatives, regulatory guides and virtual asset frameworks. These initiatives provide opportunity to crypto businesses that are seeking to build business relationships within this emerging industry, within a region.
Legal Resources / Regulatory Links
This is the primary legislation governing the licensing regime for Virtual Asset Trading Platform (VATP) operators in Hong Kong.
II. Guidelines for Virtual Asset Trading Platform Operators
III. Guideline on Anti-Money Laundering and Counter-Financing
of Terrorism (For
Licensed Corporations)
IV. Virtual Asset Trading Platform Operators – Official Register
This is the principal regulatory guideline for licensed VATP operators. It covers custody arrangements, client asset protection, governance, operational controls, cybersecurity, risk management, and ongoing compliance requirements.
This guideline establishes the AML/CFT obligations applicable to SFC-licensed corporations, including those conducting virtual asset activities.
This handbook sets out the licensing requirements applicable to SFC-regulated entities, including firms conducting virtual asset brokerage, advisory, and asset management activities under Type 1, Type 4, and Type 9 regulated activities.
Official register maintained by the Securities and Futures Commission (SFC) containing licensed, deemed-to-be-licensed, and applicant Virtual Asset Trading Platform (VATP) operators.
Official licensing framework for Trust and Company Service Providers (TCSPs)
administered by the Companies Registry.
Taxation
The Hong Kong tax treatment of a crypto business must be evaluated by the structure of the company, nature of business activities, origin of profits, and business model. Under Hong Kong’s territorial tax principle, the profits of companies are taxed based on their source and not on where they are incorporated.
Profits Tax
Profits Tax
Companies pay profits tax only on income sourced from Hong Kong. The standard rate is 16.5% on assessable profits, with a two-tier regime where the first HKD 2 million of profits are taxed at 8.25% for qualifying entities. Profits considered offshore – for example, where services are arranged and effected wholly outside Hong Kong – may be exempt if properly structured and substantiated.
Dividends and Capital Gains
Dividends and Capital Gains
Dividends received and paid are generally not subject to withholding tax in Hong Kong. There is no separate tax on capital gains, which is advantageous if the MSO is later sold or if intra-group restructurings take place, subject to anti-avoidance rules.
Indirect Taxes
Indirect Taxes
There is no VAT or GST in Hong Kong. Money-service fees and FX spreads are not eroded by consumption tax, which is particularly important for high-volume, low-margin MSO business models.
Payroll & Social Contributions
Payroll & Social Contributions
Employees (including local directors, CO/MLRO and operations staff) pay Salaries Tax on a progressive scale, currently capped at 15% of net chargeable income. Employers make relatively modest Mandatory Provident Fund (MPF) contributions up to a statutory cap, which keeps total employment costs predictable compared with many other financial centres.
Stamp Duty & Miscellaneous Taxes
Stamp Duty & Miscellaneous Taxes
Stamp duty mainly affects transfers of Hong Kong stock and immovable property; it is usually not a core cost for MSOs unless they hold such assets. There is no net-worth tax, no tax on undeclared retained earnings as such, and no formal thin-capitalisation rules, although arm’s-length transfer-pricing principles apply for intra-group arrangements.
FAQ About Crypto License in Hong Kong
1. Do I need a Hong Kong Crypto License?
The need for a license depends on the services your company seeks to render. Virtual assets activities will typically be covered by various licensing schemes and rules.
2. Which Hong Kong Crypto License Should I Apply For?
Hong Kong's crypto licensing structure does not take a 'one size fits all' approach. It is important to assess the exact service(s) to be rendered, such as custody, trading, advisory services, asset management or operating a virtual asset trading platform.
3. Can a Foreign Founder Own a Hong Kong Crypto Company?
Yes, any foreigner and/or foreign company can be a shareholder in a Hong Kong company under various licensing schemes.
4. How Long Does It Take to Obtain a Hong Kong Crypto License?
The time to obtaining a license varies depending on the type of licensing route chosen. For a simple custody based structure, it can take several months, whereas an SFC licensed or VATP platform will generally need longer processing and regulatory review.
5. Do I Need a Physical Presence in Hong Kong?
For most regulated structures, you will need a presence in Hong Kong. The extent required varies depending on your selected license and business model.
6. Will I Have Compliance Obligations After Obtaining a License?
Yes. Regulated activities require you to put in place: Anti-money Laundering/Counter-financing of terrorism measures; Customer due diligence procedures; Internal policies and monitoring systems; ongoing compliance arrangement and so forth.
7. Can One Company Provide Multiple Virtual Asset Services?
It is possible to conduct more than one virtual asset related activities provided that the respective applications are submitted and the company is licensed accordingly for multiple activities under a particular framework.
8. Can I Operate a Crypto Exchange in Hong Kong?
Only those authorised under the VATP framework will be permitted to operate an order-matching virtual asset trading platform.
9. What Banking Options Are Available for Hong Kong Crypto Businesses?
The ability to get a bank depends on business model, licensing status, customer target market and project risk profile.
10. What Tax Considerations Should I Review When Establishing a Hong Kong Crypto Business?
The relevant taxes are Profits Tax, other tax considerations like international and cross-border implications. No VAT/GST or tax on withholding of dividend income is payable.
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