FSTB and SFC consult on proposed licensing regimes for “virtual asset advisers and asset managers

On 24 December 2025, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) jointly published two separate consultation conclusions – one regarding a proposed licensing regime for virtual asset (VA) dealers (VA Dealing Consultation Conclusions) and the other regarding a separate licensing regime for VA custodians.

These conclusions were issued in response to consultation papers published in June 2025 in respect of a proposed VA dealing licensing regime and a VA custody licensing regime.

VA dealers

The definition of VA dealing will be aligned with the scope of Type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance (Cap. 571) (SFO) as part of the “same activity, same risks, same regulation” principle. This will cover a wide range of VA dealing activities, ranging from simple VA-VA or VA-fiat conversions to more complex brokerage and block trading activities, and also margin trading in VAs. Dealing activities relating to tokenised securities or derivatives and structured products will continue to be subject to existing requirements for dealing in securities, futures contracts, or OTC derivative products (as the case may be).

On applicable exemptions, the FSTB and SFC noted that the majority of respondents advocated for alignment with Type 1 regulated activity. However, this is still being considered and there is still a possibility that the eventual legislative amendments to introduce VA dealing licensing requirements may not include every exemption currently available for Type 1 regulated activity. Exemptions which are being considered include the following:

1. Transactions conducted through SFC-regulated dealers (i.e., the equivalent of the “chaperone” exemption under the securities dealing regime)
2. Transactions conducted as principal
3. Intra-group transactions
4. Transactions using VAs as payment for goods and services
5. Distribution of VAs generated as rewards for ledger maintenance or transaction validation
6. Distribution of VAs by VA issuers only through SFC-regulated dealers, or only to professional investors
7. Carve-outs for certain licensed entities (e.g., stablecoin issuers and VA asset managers)

On regulatory requirements, the following points were made:

1. The SFC is still considering the extent to which licensed VA dealers will be allowed to deal with client VAs via unlicensed exchanges or liquidity providers. Currently, intermediaries are required to partner with SFC-licensed VA trading platforms (VATPs) or licensed banks which meet the SFC’s VA custody requirements, due to the risk that overseas platforms are not  subject to comparable regulatory standards.
2. Licensed VA dealers will be required to use only Hong Kong-licensed VA custodians (and not those regulated overseas) to safeguard client VAs. Other custody-related requirements are still being considered with a view to the variety of VA dealing business models in the market.
3. Licensed VA dealers will be subject to the same financial resources requirements as SFC-licensed corporations for Type 1 regulated activity (dealing in securities).

VA custodians

The definition of VA custody will cover the safekeeping of any instrument enabling the transfer of VAs for  any person. This will capture entities which safekeep private keys, but not trustees or fund managers which delegate the VA custody function to a third-party custodian. The definition is technology neutral and does not depend on the use of any specific decentralised model or technological service – instead, the substance of the service is key. Custody of tokenised securities will not be in scope.

The determining factor would be whether a person can unilaterally transfer its clients’ VAs – for example, this would capture multi-party computation (MPC) service providers whose clients cannot unilaterally transfer assets (e.g., if they require a recovery kit from the MPC service provider or the MPC service provider to play a role in reconstructing the private key), but not those whose clients can do so without their support in any form. A staking service provider which has the ability to transfer client VAs will be caught, but a non-custodial wallet provider which does not have this ability will be out of scope.

On applicable exemptions, the SFC has stated that given the definition, entities which do not safekeep private keys or similar instruments will not require an express exemption. Other exemptions being considered include:

1. Allowing PE/VC fund managers to self-custodise tokens issued by new projects which they are invested in, up to a limited threshold, given the difficulty of obtaining support from established VA custodians during the initial stages after launch.
2. Exempting companies which only custodise VAs for their group companies, regardless of whether fees are charged.
3. Exempting legal and accounting professionals holding back-ups of private keys or similar instruments for their clients or appointed by a court to administer VAs.
4. Exempting licensed stablecoin issuers custodising only stablecoins that they issue.

On regulatory requirements, the following points were made:

1. Overseas group entities which support licensed VA custodians (e.g., through shared resources and infrastructure) do not need to be separately licensed, provided the licensed VA custodian retains the ability to unilaterally and independently transfer client VAs, and such overseas entities do not market themselves as being licensed by the SFC.
2. Individuals who are involved in core custody functions (including senior management personnel, personnel with direct access to private keys or the authority to execute VA transfers, or personnel who participate in multi-signature schemes or have access to private key generation, storage, or recovery systems) will need to be appointed as responsible officers, managers-in-charge, or other regulatory function holders, and meet fit and proper requirements.
3. Licensed VA custodians will be permitted to offer staking services subject to safeguards similar to those imposed on licensed VATPs. These safeguards are being reviewed as custody technologies continue to evolve.
4. Licensed VA custodians will be subject to AML/CFT due diligence requirements in determining the types of VAs they provide custody services for. This will be aligned with existing requirements for licensed VATPs.
5. (Licensed VA custodians will be subject to the same financial resources requirements as SFC-licensed corporations for Type 13 regulated activity (providing depositary services for a relevant collective investment scheme).
6. The SFC will consider various regulatory requirements proposed by respondents, including hot-cold wallet storage, insurance coverage, private key management controls, audits, and business continuity and disaster recovery.

VA advisers and asset managers

The VA Dealing Consultation Conclusions were accompanied by a further consultation to extend separate licensing regimes for VA advisers and asset managers. This aligns with the “same activity, same risks, same regulation ” principle by tracking the existing regulatory regimes for Type 1 (dealing in securities), Type 4 (advising on securities), and Type 9 (asset management) regulated activities.

The definition of VA advisory service will be aligned with Type 4 regulated activity (advising on securities), covering the giving of advice or the issuance of analyses or reports on the acquisition or disposal of VAs. The applicable exemptions will also be similar, covering solely advising wholly owned group companies, acts which are wholly incidental to licensed VA dealing or fund management, acts by solicitors, counsel, certified public accountants, or registered trust companies which are incidental to their duties, or acts conducted through a generally available publication or broadcast.

Regulatory requirements for licensed VA advisers are also expected to be broadly similar to those applicable to Type 4 licensed corporations, including AML/CFT, financial resources, knowledge and experience, reporting and disclosure, and investor protection safeguards (i.e., client knowledge assessment, training and suitability, as well as preventing conflicts of interest).

Likewise, the definition of VA management will be aligned with Type 9 regulated activity (asset management) and will refer to providing the service of managing a portfolio of VAs for another person. Please note that the licensing requirement applies regardless of the amount of VAs involved, and even firms which invest in a small or de minimis amount of VAs will be caught. The applicable exemptions will also be similar, covering services to wholly owned group companies, acts which are wholly incidental to licensed VA dealing, or acts by solicitors, counsel, certified public accountants, or registered trust companies which are incidental to their duties.

Regulatory requirements for licensed VA asset managers are also expected to be broadly similar to those applicable to Type 9 licensed corporations. The SFC is considering whether licensed VA asset managers should be restricted to safekeeping VAs under management only with licensed VA custodians, or whether they should be permitted to appoint any custodian (including those which are unlicensed or regulated overseas).

As was the case for VA dealers and custodians, pre-existing VA advisers and asset managers will not be provided with any deeming arrangement, and will be required to obtain a licence once the regimes commence.

Next steps

The further consultation for VA advisers and asset managers will end on 23 January 2026. Once the FSTB and SFC receive feedback, the legislative proposals to implement the above licensing regimes will be finalised, and the relevant bill is expected to be introduced to the Legislative Council sometime in 2026.

Conclusion

The overall direction set by the FSTB and SFC is to align the new VA licensing regimes with existing regimes which cover the traditional securities market, building upon the existing regime for licensed VATPs introduced just a few years ago. This is likely to improve clarity and ease of implementation for affected industry participants, and position Hong Kong optimally as a trusted and leading VA hub for a wide range of products and services. 

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