Overview of Hong Kong's VASP Licensing Framework
Hong Kong is establishing a Virtual Asset Service Provider (VASP) licensing regime under the 2022 Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill. This mandates that all virtual asset exchanges operating in Hong Kong must obtain a license from the Securities and Futures Commission (SFC).
Key Timeline and Compliance
- Effective Date: June 1, 2023 (for industry adaptation)
- Regulatory Oversight: Licensed exchanges must submit audited financial statements regularly. The SFC retains authority for on-site inspections.
Capital Requirements for VASP License Applicants
Professional Investor Restrictions (Initial Phase)
| Investor Type | Financial Threshold (HKD) |
|---|---|
| Individual | ≥8M investment portfolio |
| Trust/Corporation | ≥40M total assets |
| Partnership | ≥8M portfolio or ≥40M total assets |
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Core Eligibility Criteria
Entity Structure
- Permitted: Hong Kong-registered companies or non-HK companies registered under the Companies Ordinance.
- Excluded: Unincorporated businesses (e.g., sole proprietorships), individuals, and overseas entities without local registration.
Personnel Requirements
Minimum 2 Responsible Officers (ROs):
- At least 1 RO must be an executive director.
- 1 RO must reside in Hong Kong permanently.
- All directors and ultimate owners must pass the "Fit and Proper" test.
Application Process for VASP License
Preparation Phase (2-3 months)
- Recruit qualified ROs
- Draft business plan and corporate structure documents
- Complete WINGS application form
SFC Review Phase (4-6 months)
- Address regulatory queries
- Secure office space with compliant infrastructure
- Open corporate bank account
- Final approval notification
Hong Kong Financial License Categories
| License # | Service Type | Relevance to Crypto |
|---|---|---|
| 1 | Securities Trading | Required for crypto exchanges |
| 4 | Securities Advice | Supplementary services |
| 7 | Automated Trading Services | Mandatory for digital assets |
| 9 | Asset Management | Global investment flexibility |
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Advantages of Type 9 License
- Tax Efficiency: Benefit from Hong Kong’s low corporate tax rates.
- Global Market Access: Invest in international equities, derivatives, and reverse A-share trading via Stock Connect.
- Talent Pool: Access to 40,000+ licensed financial professionals.
FAQ: Hong Kong Virtual Asset Licensing
Q1: Can overseas companies apply for a VASP license?
A: No—only Hong Kong-registered entities qualify. Foreign firms must establish a local subsidiary.
Q2: What happens if my exchange serves non-professional investors?
A: Violations may result in license revocation or fines up to HKD 5 million.
Q3: How long does the SFC typically take to approve licenses?
A: 6-9 months total, assuming complete documentation and responsive communication.
Q4: Are there ongoing compliance costs?
A: Yes—licensed exchanges must budget ~HKD 2M/year for audits, reporting, and compliance staffing.
Q5: Can Type 9 license holders custody client assets?
A: Optional. Non-custodial licenses require only HKD 100K in liquid capital vs. HKD 5M for custodial services.