Hong Kong Crypto License

The Ultimate Guide to Obtaining a Hong Kong Crypto License

Hong Kong is rapidly gaining momentum as one of the world’s most crypto-friendly jurisdictions, offering legal certainty, global banking access, and strategic positioning in Asia. With the implementation of a clear and enforceable crypto licensing regime by the Securities and Futures Commission (SFC), starting and scaling a crypto business in Hong Kong is now a well-defined process.

Whether you are a centralized exchange, wallet provider, crypto custodian, or digital asset fund manager, this guide will walk you through the steps to obtain a Hong Kong crypto license, fulfill compliance obligations, and succeed in one of the world’s leading financial centers.

Why Choose Hong Kong for Your Crypto Business?

As one of Asia’s premier financial hubs, Hong Kong offers the perfect combination of legal predictability, access to capital, and low taxes, making it an ideal destination for launching and scaling crypto operations.

Key Benefits:

• Regulated Environment: Hong Kong has implemented a structured licensing process that enables legal operation of centralized crypto platforms.

• No Capital Gains Tax: Profits from crypto trading are not taxed.

• Access to Asian Capital Markets: Close proximity to Mainland China, Japan, and Southeast Asia offers vast market access.

• Global Reputation: Hong Kong’s legal and financial institutions are globally respected, helping establish investor trust.

• Bilingual Legal System: English and Chinese documentation are both accepted.

Hong Kong has also embraced Web3 development, with government initiatives supporting blockchain innovation and fostering a technology-friendly regulatory climate.

Who Regulates Crypto in Hong Kong?

The primary authority is the Securities and Futures Commission (SFC), which regulates virtual asset activities under two major laws:

• Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)

• Securities and Futures Ordinance (SFO)

As of June 2023, any centralized exchange operating in or targeting users in Hong Kong must obtain a Virtual Asset Trading Platform (VATP) license.

The Hong Kong Monetary Authority (HKMA) may also be involved if your business offers payment or custody services that overlap with banking activities.

Types of Crypto Licenses in Hong Kong

1. Virtual Asset Trading Platform (VATP) License

Required for businesses that:

• Match trades between buyers and sellers

• List virtual assets for trading

• Provide an order book or facilitate crypto-to-crypto/crypto-to-fiat trading

This license covers Type 1 and Type 7 regulated activities under the SFO:

• Type 1: Dealing in securities (including tokens classified as securities)

• Type 7: Automated trading services

2. Custody Services License (Upcoming)

Although currently not regulated separately, the SFC is developing a framework for crypto custodians. In the meantime, custody obligations are embedded in the VATP license.

3. Other Licenses (if applicable)

• Fund Management License – For crypto hedge funds or asset managers

• Advisory License – If providing investment advice on virtual assets

• Trust or Company Service Provider (TCSP) License – For some DeFi or wallet-related services

Legal Requirements for a Crypto License

To qualify for the VATP license, a company must:

• Be incorporated in Hong Kong

• Maintain a local office and physical presence

• Appoint at least two Responsible Officers (ROs) with appropriate experience and qualifications

• Hire a Compliance Officer and AML/CFT Officer

• Implement robust internal control systems, including:

  • Cold wallet management (minimum 98% of user funds)

  • Real-time transaction monitoring tools

  • On-chain analytics and blockchain forensics tools

• Purchase insurance coverage for custody risk and cyber incidents

• Apply and follow a risk-based approach to onboarding and client profiling

Notable Operational Requirements:

• Staff training on AML/CTF obligations

• Segregation of client assets

• Ongoing compliance reporting to the SFC

Step-by-Step Process to Obtain a VATP License

Step 1: Set Up a Hong Kong Legal Entity

Establish a private limited company with a physical office, company secretary, and registered address. Ensure the business description includes virtual asset services in the Articles of Association.

Step 2: Appoint Key Personnel

• 2 Responsible Officers (ROs): Must have at least 3 years’ relevant experience in regulated financial services.

• AML/CFT Compliance Officer

• Chief Information Security Officer (CISO) – Optional but recommended

• Directors and shareholders must pass the Fit and Proper Test administered by the SFC.

Step 3: Develop Compliance Infrastructure

Prepare internal policies that cover:

• KYC/EDD Procedures

• Client risk scoring

• Cold and hot wallet protocols

• Disaster recovery and cyber resilience

• Suspicious Transaction Reporting (STR) procedures

• Vendor due diligence (if using third-party custody)

Step 4: Prepare and Submit Application

Required documentation includes:

• Detailed business plan

• Description of platform operations

• AML/CFT policy manuals

• Cybersecurity architecture overview

• Background checks and CVs of directors/ROs

• Token whitepaper and legal classification (if listing proprietary tokens)

• Insurance documentation for user assets

All documentation must be submitted in English or Chinese and follow the SFC licensing handbook.

Step 5: Interviews and Clarifications

The SFC may:

• Conduct interviews with Responsible Officers

• Request further documents

• Inspect your tech stack or risk models

Be prepared for follow-up queries that may extend the timeline.

Step 6: License Approval and Post-License Obligations

Once approved:

• Your platform will be listed on the SFC Public Register

• You must comply with ongoing AML, auditing, reporting, and data retention requirements

• Any material change (token listing, new business model) must be pre-approved by the SFC

Timeline and Costs

Estimated Timeline:

Estimated Costs:

Ongoing Compliance Obligations

Licensed VATPs must:

• Conduct enhanced due diligence on high-risk clients

• Maintain logs of all transactions and communications for at least 7 years

• File annual audits, compliance reports, and incident disclosures

• Implement continuous transaction monitoring and wallet screening

• Report any breaches, hacks, or material changes to the SFC immediately

Non-compliance can result in:

• Fines up to HKD millions

• License suspension or revocation

• Public enforcement actions

Taxation of Crypto Businesses in Hong Kong

Hong Kong’s tax system is one of the most favorable in the world:

• No capital gains tax on cryptocurrency profits

• No VAT or consumption tax

• Territorial corporate tax:

  • 8.25% on profits up to HKD 2 million

  • 16.5% on profits above HKD 2 million

Only profits earned within Hong Kong are taxed, which is beneficial for global digital businesses.

Common Challenges and How to Overcome Them

Hong Kong vs MiCA: How Do They Compare?

While MiCA (Europe) offers unified licensing across the EU, Hong Kong’s localized licensing provides:

• A clear domestic regulatory sandbox

• Stronger presence in Asia-Pacific capital markets

• Faster regulatory updates for emerging technologies (e.g., DeFi, tokenized securities)

Both frameworks emphasize:

• Investor protection

• Transparency

• AML/CFT compliance

Final Thoughts

In 2025, Hong Kong stands at the forefront of crypto regulation in Asia, combining world-class legal standards with a business-friendly tax regime. By obtaining a Hong Kong VATP license, your business can:

• Operate legally and transparently

• Attract institutional clients

• Access Asia-Pacific markets

• Build long-term credibility in the Web3 space

If you’re planning to launch a centralized exchange, wallet platform, or crypto investment firm, Hong Kong provides the regulatory certainty and financial infrastructure to scale globally.