Like many other jurisdictions, the initial response in Hong Kong to the advent of bitcoin and other cryptocurrencies was to ask: “what is this?” This has since evolved, although in the initial stages of regulatory thinking virtual assets (VAs) were regulated only to the extent that they fitted into existing laws governing financial services. For example, VAs that resemble traditional securities were treated as ‘securities’ or 'futures contracts' under existing securities laws, and were subject to the licensing, marketing and other requirements under Hong Kong law.

However, as these laws were not formulated with VAs in mind, there were VAs that did not fit neatly into traditional definitions and so fell outside the regulatory net. The securities regulator, the Hong Kong Securities and Futures Commission (SFC), took steps to address this in the form of public statements, warning the public that VAs, such as cryptocurrencies, needed to be licensed. For instance, Initial Coin Offerings could be seen as “collective investment schemes,” and therefore required a licence under the Securities and Futures Ordinance (SFO), whilst bitcoin futures also required a licence under the SFO as “futures contracts.”

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