Hey hey hey, all you Web3 warriors and future superstars of the virtual asset (VA) world! Thinking of making it big in Hong Kong’s financial scene by starting your own VA business? Maybe a fund, an exchange, or just helping people trade some VAs? Hold your horses! In Hong Kong, you can’t just do whatever you want, lah. Getting the right licence is your entry ticket. Otherwise, you might get a friendly visit from the authorities, and that’s no fun. Today, let’s break down this “licence collection” game for you with some local flavour and a dash of humour.

1. Starting a Fund to Invest in VAs? You’ll Need a “Type 9 Licence” First!

Thinking of being a fund taipan and starting a portfolio dedicated to virtual assets? Congrats, you’re now on the radar of Hong Kong’s Securities and Futures Commission (SFC).

In Hong Kong, if you’re managing assets for others—whether it’s stocks, bonds, or virtual assets—you need a Type 9 (Asset Management) licence. Think of it as your official ID as a professional fund manager.

But wait, there’s more. If 10% or more of your fund’s portfolio is in VAs, the SFC will think, “Wah, this guy is serious,” and a basic Type 9 licence won’t cut it. You’ll have to comply with the additional terms in the SFC’s Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets. People in the industry call this an “upgraded Type 9” or a licence with a “VA uplift”. Basically, the SFC will put your VA custody arrangements (keep those assets safe!), risk management (don’t you dare go all-in!), and valuation methodology (no funny numbers!) under a microscope. So, wanna be a VA fund manager? You need more than just good instincts; you need the SFC’s blessing.

2. Trading “Security-like” VAs for Clients? Get a “Type 1 Licence”!

If a virtual asset acts like a stock—say, a Security Token (STO) that pays dividends, gives voting rights, or represents a share in a company—then it’s not just a simple “asset.” Under Hong Kong’s Securities and Futures Ordinance (SFO), these STOs are considered “securities.”

So, if your business involves trading these security-like VAs for clients, you’re basically acting as a securities broker. For that, you absolutely must have a Type 1 (Dealing in Securities) licence. Don’t have one? Then there’s not much difference between you and an unlicensed “dai pai dong broker,” and the consequences can be serious.

3. Trading “Non-Security” VAs for Clients? You Might Need an “MSO Licence”!

So what if you’re just helping people trade “non-security” VAs like Bitcoin and Ethereum, especially via over-the-counter (OTC) desks? Think you’re off the hook? You’re too young, too naive.

This used to be a grey area, but the government has caught on to the money laundering risks. Under new legislative proposals, any person or company providing a service to exchange VAs and fiat money (like HKD or USD) might need to get a Money Service Operator (MSO) licence from the Customs and Excise Department. The Financial Services and the Treasury Bureau has already published a Public Consultation paper on regulating VA OTC services, so bringing them under a licensing regime is definitely on the cards. If you want to be a VA “money changer,” keep a close eye on the latest rules and get ready to apply for that MSO licence.

4. Running Your Own Exchange for “Security-like” VAs? You’ll Need the “Type 1 & 7” Combo!

If your ambition is to run a centralized exchange and your platform lists those “security-like” tokens (STOs), then you’ll need more than just one licence.

First, because it involves “dealing in securities,” a Type 1 licence is a must. Second, because you’re providing an automated system for buyers and sellers to be matched, you’re covered by Type 7 (Providing Automated Trading Services). So, to run an STO exchange, you need to collect the whole set—both Type 1 and Type 7 licences—to operate legally.

5. Running an Exchange for “Non-Security” VAs Only? The “AMLO Licence” is Waiting for You!

“I don’t want to deal with all that complicated stuff. My exchange will only trade non-security VAs. Is that okay?” Yes, but you still need a licence!

Under the new Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022, any platform operating in Hong Kong that provides services for non-security virtual assets (i.e., a crypto exchange) must be licensed by the SFC as a Virtual Asset Service Provider (VASP). This is what everyone is calling the VASP regime or the AMLO licence. You can check out the details on the SFC’s page for the VATP licensing regime. So even if you’re just doing simple crypto-to-crypto trading, you still have to queue up at the SFC for a licence.

6. Running a VA E-Wallet? That’s Kinda Uncharted Territory… For Now!

As for operating an e-wallet just for storing and handling virtual assets, the regulations here are a bit fuzzy. The e-wallets we use daily for “fiat money,” like PayMe and AlipayHK, are regulated by the Hong Kong Monetary Authority (HKMA) under the Stored Value Facilities (SVF) Licence.

However, there isn’t a dedicated, standalone licence for a wallet that only holds virtual assets… yet. But don’t think this means you can do whatever you want. Any VA-related business must comply with Hong Kong’s Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CTF) laws—doing proper Know-Your-Customer (KYC) checks is non-negotiable. Plus, the HKMA is actively researching the “e-HKD,” so regulation in this space is bound to get clearer. It might be a blue ocean now, but new rules could appear anytime. For those wanting to plant a flag here, you better keep your eyes peeled.

Conclusion:
Feeling a bit dizzy after all that? We get it. Doing VA business in Hong Kong is like playing a complicated game of Monopoly—one wrong move and you could “Go to Jail.” But clear regulations also mean a more mature market, which is a form of protection for investors and entrepreneurs alike. So, before you dive into this exciting world, make sure you do your homework, talk to the pros, and get all your “entry tickets.” Only then can you play with peace of mind!