Comprehensive regulation to come with further licensing regimes for crypto advisory and asset management services, in addition to crypto dealing and custody.

By Simon Hawkins and Adrian Fong

On 26 May 2026, the Hong Kong Financial Services and Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) issued consultation conclusions on their legislative proposals to regulate virtual asset advisory (VA advisory) and virtual asset management (VA management) services (Consultation Conclusions).

This follows their December 2025 consultation conclusions on virtual asset dealing (VA dealing) and virtual asset custodian services (VA custodians), where it was confirmed that new licensing regimes for those VA activities would be introduced (see this Latham blog post). Concurrently, they launched a further consultation to determine whether and how VA advisory and VA management services also should be subject to separate licensing regimes.

The Consultation Conclusions mark a further step in a continuing journey to establish a comprehensive regime for VA activities in Hong Kong. In 2023, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) was amended to establish a virtual asset service provider (VASP) regime, with virtual asset trading platform operators being the first to be brought within the regulatory perimeter. Many other jurisdictions, like the European Union, Singapore, and the United Arab Emirates (and its free-trade zones), have already implemented a comprehensive framework for regulating the full range of VA activities, drawing upon their respective regimes for securities and futures activities. Now, Hong Kong will also join the list of jurisdictions that have a comprehensive regime for regulating centralised VA activities, representing another step in achieving its objective of fostering a sustainable and leading VA ecosystem.

This blog post sets out the key details about the forthcoming VA advisory and VA management licensing regimes, as well as next steps for all VA participants interested in applying for licenses under the expanded VA regime.

VA Advisory

Taking reference from the licensing regime for Type 4 (advising on securities) regulated activity under the Securities and Futures Ordinance (SFO), VA advisory will cover:

  • giving advice on whether; which; the time at which; or the terms or conditions on which, VAs should be acquired or disposed of; or
  • issuing analyses or reports, for the purposes of facilitating the recipients of the analyses or reports to make decisions on whether; which; the time at which; or the terms or conditions on which, VAs are to be acquired or disposed of.

The scope is intended to capture algorithms, recommendation tools, research, commentary, and trading signals that offer advice on the trading of VAs (e.g., based on the investor’s profile). It will also cover mirror / copy trading models that involve providing investors with tools to replicate trading strategies (if execution services are also provided, then this could also constitute VA dealing and/or VA management activity).

Products that fall within the securities regime, e.g., VA derivatives and tokenised securities, will continue to be regulated under the securities and futures regime, so a VA advisory licence will not be required for intermediaries advising on those products. However, if advice is provided for a portfolio that encompasses both VAs and securities, the provider must be licensed under both the VA and securities regimes.

Exemptions that exist under the Type 4 regime will be brought across to the VA advisory regime. In particular, an intra-group exemption that allows advice to be provided to wholly owned group companies without the need to obtain a licence will be established.

The SFC has acknowledged the increasing significance of “finfluencers” who provide advice on specific products or tokens, and is conducting a separate exercise to ensure both the VA and securities regime are responsive to current market practices. It will also consider if further consultation is necessary for a comprehensive regime that targets finfluencers.

Currently, licensed corporations and registered institutions that provide VA advisory services must comply with the requirements set out in the Joint circular on intermediaries’ virtual asset-related activities (Joint Circular) issued by the SFC and the Hong Kong Monetary Authority (HKMA). The SFC imposes terms and conditions on licensed persons engaging in VA advisory, setting out its expectations in respect of assessing clients’ knowledge of VAs and the suitability of the recommendations. The SFC intends to impose similar requirements onto VA advisors under the new regime, and will conduct a review and public consultation in due course on the standards of conduct.

VA Management

Similarly, taking reference from Type 9 (asset management) regulated activity under the SFO, the licensing scope for VA management will cover providing a service of managing a portfolio of VAs for another person.

Currently, the SFC applies a “de minimis threshold” so that asset managers investing below the threshold (i.e., a stated investment objective or an intention to invest less than 10% of the gross asset value of a portfolio in VAs) are not regarded as providing VA management services under the securities regime. The incoming VA management regime does not impose a “de minimis threshold”. However, if a fund manager inadvertently acquires VAs due to an unexpected or involuntary event (e.g., where tokens that a portfolio invested in cease to be “securities” under the SFO), this may not amount to carrying on a VA management business if the manager has taken all reasonably practicable steps to dispose of the portfolio’s holdings in VAs in a timely manner.

Investment products that reference VAs (e.g., derivatives, structured products, funds, ETFs, and fund-of-funds) would likely continue to fall within the securities regime, but a person managing a portfolio of both spot VAs and VA-referencing securities would also require a licence under the VA regime.

Similar to Type 9 regulated activity, VA managers will be exempt from obtaining a separate VA dealing licence for trading activities that are carried out solely for the purpose of VA management (e.g., accepting VA subscriptions or converting VAs into cash). Also, an exemption will apply for providing VA management services to wholly owned group companies.

Noting that the nature and risk profile of HKMA-licensed stablecoins are different from other VAs, SFC-licensed persons will also be exempt from obtaining a VA dealing licence if their activity only involves HKMA-licensed stablecoins.

Importantly, and as a result of industry responses to the consultation, the SFC will permit private funds to retain the flexibility to appoint qualified custodians (notably, they do not have to be SFC-licensed custodians). If the manager intends to adopt self-custody, they will need to comply with the SFC’s robust custody requirements (and consider whether they may need to obtain a VA custodian licence).

The Joint Circular also mandates that existing SFC-licensed persons who provide VA management services obtain an uplift on their licence, and agree to comply with terms and conditions around their VA management activity. The SFC is actively reviewing these standards, and will publicly consult on the expected standards for VA managers in due course.

Regulatory Framework

Broadly speaking, the requirements to obtain a licence for any of the VA activities will require:

  • A local presence, i.e., the licencee must be (i) a locally incorporated company with a permanent place of business in Hong Kong, or (ii) a company incorporated elsewhere but registered in Hong Kong under the Companies Ordinance (i.e., a Hong Kong branch). All licensees will be required to identify suitable premises for the company’s storage of books and records
  • Fit-and-proper requirements for licensed personnel, directors, and substantial shareholders, as well as a minimum of two responsible officers supervising the regulated business
  • Knowledgeable and experienced personnel
  • Risk management procedures
  • Compliance with the SFC’s conduct of business requirements, including around proper protection of client assets and investor protection safeguards (e.g., risk profiling, exposure limits, etc.)

In line with the regulator’s “same activity, same risks, same regulation” approach, VA advisors and VA managers that do not hold client assets will only be required to have a minimum required liquid capital of HK$100,000 (approximately US$12,000). In any other case, a minimum paid-up share capital of HK$5 million (approximately US$630,000) and a minimum required liquid capital of HK$3 million (approximately US$380,000) will be imposed. This is the same regulation as under the securities regime. There is agreement in principle that a corporation licensed under both the securities and VA regimes should not be subject to double regulatory capital requirements.

Next Steps

The Hong Kong government intends to introduce a bill into the Legislative Council this year to effect the new VA regime. The bill will include the legislative amendments to give effect to the VA dealing, VA custodian services, VA advisory, and VA management regimes.

As confirmed, no deeming arrangement will be offered under new VA activities, and the licensing regime will take full effect on the commencement date of the relevant statutory provisions. Therefore, all industry stakeholders that carry on VA dealing, VA custodian services, VA advisory, and VA management services are encouraged to approach the SFC (or in the case of banks, the HKMA) now to start the pre-application process, and so the regulators can provide feedback around the regulatory requirements. There will be an expedited approval process for licensed corporations and registered institutions that currently provide VA services under the existing regime.

As mentioned, the SFC is expected to conduct a separate consultation exercise on a range of regulatory requirements that will be in place for all VA licensees and registrants. We expect significant market interest to participate in this consultation as the final touches to Hong Kong’s comprehensive VA regime are being made.

For further analysis or explanation of the subject matter, please contact one of the authors or the Latham lawyer with whom you normally consult.