Hong KongRegulation on Virtual Asset-related Activities

On 23 May 2023, the Securities and Futures Commission (SFC) issued the Consultation Conclusions on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the SFC. The regulatory requirements cover, among others, safe custody of assets, Know-Your-Client processes, anti-money laundering/counter-financing of terrorism (AML/CFT), avoidance of conflicts of interest, criteria for admitting virtual assets for trading, prevention of market manipulative and abusive activities, and cybersecurity.

The Guidelines for Virtual Asset Trading Platform Operators (Guidelines for VATPO) became effective on 1 June 2023. The Guidelines for VATPO sets out, among others, safe custody of assets, segregation of client assets, avoidance of conflicts of interest and cybersecurity standards and requirements expected of licensed trading platforms.

In addition to Guidelines VATPO, the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers), the Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities of Licensed Corporations and SFC-licensed Virtual Asset Service Providers, and the Disciplinary Fining Guidelines, have also become effective on 1 June 2023.

To enable readers to have the latest regulatory requirements (rather than a summary of certain salient points) on various virtual asset-related activities, please refer to the links from the SFC below:

The latest guidelines also provide details and clarifications to the competence requirements for individuals and external assessment reports required for licence applications (for virtual asset trading platform operators).

If you are currently carrying out virtual asset-related activities in Hong Kong and considering to apply for a licence; would like to assess whether a SFC licence is required for your activities; or considering to enter into the Hong Kong market, please contact us. We and our virtual asset specialists would be able to provide you with a preliminary assessment and advice as to whether and what type of licence would be required, and whether you are able to comply with the SFC latest requirements.

We and our virtual asset specialists are ready to help and advise you on the structuring of the company, review your business plans and various agreements and policies.

Alfred Leung, Partner (E: alfredleung@hkytl.com; T: 852 3468 7202)