Hong Kong’s regulatory environment for crypto assets includes the following key aspects:

• Legislative Developments: The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022, effective from 1 June 2023, laid the groundwork for a new licensing regime for Virtual Asset Service Providers (VASPs).
• Licensing Types: The regulatory framework introduces two main types of licences under the Securities and Futures Ordinance (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Depending on their operational scope and needs, entities may opt for one or both licences, with obtaining both recommended to ensure comprehensive compliance.
• Minimum Capital Requirement: A minimum paid-up share capital requirement of HK$5,000,000 (approximately USD 640,000) is expected for crypto exchanges based in Hong Kong, underscoring the financial robustness required.
• Application Fees: The application fees for licences are capped at $5,000, making the initial regulatory compliance process relatively accessible for new entrants.

Apart from the proposed regime specifically targeting stablecoins, other crypto assets remain largely unregulated.

Guidelines also extend to Non-Fungible Tokens (NFTs), though they are treated with a distinct regulatory approach compared to other crypto assets.

Crypto mining activities are currently unregulated in Hong Kong.

There is no specific legal framework or regulatory guidance directly addressing the creation, operation, or governance of DAOs.

Our comprehensive report delves into Hong Kong’s regulatory framework for crypto assets, highlighting:

1. Business Analysis

The report delves deeper into Hong Kong’s crypto asset regulatory framework, providing a comprehensive guide for crypto businesses. It examines essential aspects, such as

• Stablecoin Issuance: A detailed exploration of the procedural steps for stablecoin issuance under Hong Kong law (if enacted).
• Service Provider Licensing: Examination of the crypto asset service provider licensing process, enriched by an understanding of the requirements and operational standards set forth by Hong Kong’s regulatory authorities.

2. Compliance Guidance

Emphasising the importance of thorough preparation and compliance, the report offers detailed insights into compliance requirements, such as

• AML Regulations: Insights into AML and compliance frameworks, highlighting the importance of adherence to national and international standards in preventing financial crimes.
• Taxation: Overview of taxation and financial planning considerations for crypto businesses operating within the jurisdiction, reflecting the need for strategic operational structuring.

3. Launch Roadmaps

Actionable steps and up-to-date strategies for establishing and operating your crypto project in Hong Kong’s regulatory environment, ensuring a smooth and compliant launch.

4. Expert Insights

Perspectives from industry experts with a deep understanding of global regulatory environments offer guidance to navigate the complexities of Hong Kong’s crypto regulations.

Hong Kong’s strategic adoption of a regulated framework for crypto activities underscores its proactive stance in balancing innovation with investor protection. The detailed regulatory guidelines and structured licensing process provide a clear path for crypto businesses looking to operate in a dynamic and evolving market.

At D&A Partners, we have been deeply involved in the navigation of crypto regulations worldwide and offer in-depth analysis of crypto regulations by country or region through our crypto regulation map and reports, including Hong Kong’s.

With years of experience in setting up and operating FinTech enterprises, issuing digital tokens, and navigating crypto transactions in the region, we possess critical insights into local crypto regulations. This allows us to effectively guide you through every step of establishing your business in Hong Kong.

For businesses and investors navigating Hong Kong’s virtual asset sector, consider the following practical tips:

• Licensing: Consider obtaining both the SFO and AMLO licences. This dual-licensing strategy broadens your operational scope and demonstrates a strong commitment to regulatory compliance and investor protection.
• Regulatory Scrutiny: Due to the legislation’s recency, each crypto project will be scrutinised closely by regulatory authorities. This increased scrutiny means your project must be prepared for a thorough review process, emphasising transparency, compliance, and operational integrity.