How to Legally Work with Cryptocurrency in Hong Kong

The Hong Kong government is quite supportive of innovation, subsidizes the development of technologies, and fully supports progress. Blockchain and cryptocurrency are no exception. However, specifically for this sector, the government has introduced strict regulation aimed at protecting both consumers and its own reputation.

Today, you will learn how to legally conduct a crypto business in Hong Kong, pay taxes, file reports, and comply with the requirements of local and international legislation.

Legal Regulation of Cryptocurrency in Hong Kong

Hong Kong has established a regulated regime for virtual assets under the supervision of the SFC.

Since June 1, 2023, a mandatory licensing regime for virtual asset trading platforms (VATPs) has been in effect for platforms falling under the relevant regulatory regime. Since August 1, 2025, a separate regulatory regime has been in place for issuers of fiat-referenced stablecoins.

Here are several key points you should understand:

The regulatory system covers a wide range of crypto-asset operations, establishing rules for businesses.

What Cryptocurrency Operations Are Permitted in Hong Kong

Before figuring out how to legally work with cryptocurrency in Hong Kong, you should first learn about the types of activities that are generally permitted:

• Trading on licensed exchanges. The main operation is buying and selling cryptocurrency on centralized platforms, primarily those that have obtained a VATP license from the Securities and Futures Commission (SFC).
• Investment advice and asset management. Services related to advising on and managing virtual assets are regulated under the relevant SFC requirements. The principle of “same activity – same risks – same rules” applies, as it does in the traditional financial market.
• Issuance and offering of stablecoins. Since August 2025, the issuance of stablecoins pegged to fiat currencies has required a separate license from the Hong Kong Monetary Authority (HKMA). Their issuance and offering are regulated in accordance with the applicable HKMA and SFC requirements.
• Custody of digital assets. Licensed platforms may provide custody services for cryptocurrencies and tokenized securities, including assets that are not traded on the platform, subject to compliance with the established requirements.
• Dealing with tokenized securities. VATPs may act as distributors of tokenized versions of traditional financial instruments (such as bonds or fund units). Such operations are subject to securities legislation and applicable licensing requirements.

If you plan to engage in such activities as a business, appropriate licensing will often be required.

When Is a License Required to Work with Cryptocurrency?

Let us consider cases where obtaining a crypto license in Hong Kong is indispensable. The table below presents the main types of professional cryptocurrency activities for which the relevant licensing or regulation is required in Hong Kong.

Individuals may freely buy, hold, and sell cryptocurrency without a license if this does not constitute a business activity.

What Requirements Must Be Followed When Working with Cryptocurrency in Hong Kong

To plan how to legally engage in cryptocurrency activities in Hong Kong, you must take into account a number of key regulatory requirements:

1. Obtain a VATP license. A centralized platform falling under the VATP regime must obtain the relevant SFC license. A fit-and-proper assessment and systems audit are required.
2. Comply with AML and KYC requirements. All platforms are required to identify clients, monitor transactions, and verify the sources of funds.
3. Ensure segregated and secure custody. Clients’ virtual assets are segregated from the company’s funds: a maximum of 2% may be held in “hot” wallets, while the remainder must be kept in “cold” wallets.
4. Implement robust cybersecurity. Two-factor authentication and monitoring of suspicious account logins are required.
5. Undergo an external audit. Before obtaining a license, an applicant must undergo an external assessment of its policies, procedures, systems, and controls by an independent external assessor agreed with the SFC.
6. Have at least two Responsible Officers (ROs). One of them must ordinarily reside in Hong Kong; Responsible Officers are also subject to qualification and experience requirements.
7. Take into account restrictions for retail investors. For retail investors, a 12-month track record requirement for virtual assets remains in place (except for stablecoins issued by licensed issuers).
8. Obtain an HKMA license for stablecoins. An issuer must have capital of at least HKD 25 million and ensure 100% reserve backing for the coins issued.

Please note: the requirements listed above primarily apply to virtual asset trading platform activities and other regulated types of crypto business.

How to Choose a Cryptocurrency Business Model in Hong Kong

Not only company registration in Hong Kong, but also determining the key operating model is important for legalizing a cryptocurrency-related business. For example:

At the same time, you should also take into account the taxation principles applicable to different types of crypto businesses.

Taxation of Cryptocurrency Transactions in Hong Kong

The potential of your business is affected by the tax rates payable on income derived from different types of corporate activities. For example:

The current system is balanced and suitable for those considering how to legally conduct cryptocurrency activities in Hong Kong while generating high net profits.

Liability for Illegal Cryptocurrency Activities in Hong Kong

In Hong Kong, serious liability is provided for illegal cryptocurrency activities.

The unlawful provision of virtual asset-related services and fraudulent activities may result in substantial fines and imprisonment; depending on the nature of the violation, the maximum penalty may reach 10 years’ imprisonment. Money laundering involving crypto-assets may result in imprisonment of up to 14 years.

In addition, for violations of AML/KYC requirements, the SFC may impose disciplinary measures, including financial sanctions and the suspension or revocation of a license.

How to Legally Conduct Cryptocurrency Activities in Hong Kong: Step-by-Step Plan

Let us examine how to legally conduct a crypto business in Hong Kong. Step by step:

• Step 1: Check whether you need a license:
  • A VATP license is mandatory for centralized platforms that conduct business in Hong Kong or actively promote their services to local investors. Important: even if a company is registered outside Hong Kong, these requirements may apply when serving local investors as part of such activities.
• Step 2. Prepare the company’s “foundation”:
  • The regulator requires a genuine presence in the jurisdiction. This means:
    • Rent an office in Hong Kong with local staff.
    • Appoint Responsible Officers:
      • at least two individuals, one of whom should generally ordinarily reside in Hong Kong; Responsible Officers are also subject to qualification and experience requirements.
    • Prepare internal policies:
      • compliance documents;
      • KYC, AML/CFT, risk management, and cybersecurity policies. Copies of these documents form part of the application package.
• Step 3: Submit an application through the WINGS portal and undergo a preliminary SFC review:
  • Together with the application, you submit:
    • Copies of written policies and procedures.
    • Documents confirming the appointment of the External Assessor.
  • The SFC conducts a comprehensive assessment of the applicant, its beneficial owners, directors, and proposed assessor. The regulator may return the application for revision if it identifies fundamental issues.
• Step 4: Implement the systems, obtain the license, and undergo an external audit:
  • After submitting the application and during the review process, the applicant implements the proposed systems and controls: market monitoring, AML tools, KYC procedures, and custody solutions.
  • Once the systems are ready, you enter into a tripartite agreement with the SFC and the External Assessor to conduct the external assessment.

If, following the external assessment and completion of all procedures, the applicant meets the SFC requirements, the regulator may issue the license.

Legal Assistance from Lawrange

With the support of Lawrange experts, you will not only learn how to legally engage in cryptocurrency activities in Hong Kong, but will also receive:

• An initial audit – we review the company and its structure before submission to prevent a rejection at the outset.
• Preparation of a complete package of documents in accordance with SFC requirements, including AML, KYC, and risk management policies.
• Communication with the regulator – we handle correspondence and promptly address all SFC requests.
• Selection and coordination of an External Assessor – we organize the mandatory external assessment.
• Post-licensing support – we help you comply with ongoing requirements and adapt to regulatory changes.

Do not put it off. Contact us for a preliminary consultation and to launch the project!

Conclusions

Legally conducting cryptocurrency activities in Hong Kong is possible, but it requires strict compliance with regulatory requirements. The main route is to obtain the relevant SFC license for regulated virtual asset activities or an HKMA license for the issuance of regulated stablecoins. It is also important to implement AML/KYC procedures, ensure the security of assets, and undergo an external audit.

FAQ

Is a license always required to work with cryptocurrency in Hong Kong?

No. Licensing is required for regulated business activities involving virtual assets. Individuals may buy, hold, and sell cryptocurrency without a license.

Is it necessary to register a company to work with cryptocurrency in Hong Kong?

Yes. If you conduct regulated cryptocurrency activities through a legal entity, the requirements for company registration, presence, and structure depend on the applicable regime. For VATP licensing, the SFC has established specific requirements regarding the company’s presence and Responsible Officers.

Can you work with foreign clients from Hong Kong?

Yes. Serving foreign clients is possible provided that the applicable regulatory requirements are met. At the same time, licensing may be required if the activity falls under the relevant regulatory regime in Hong Kong.

What cryptocurrency activities are regulated in Hong Kong?

The following are regulated: exchanges (VATPs), exchange services, relevant intermediary services, stablecoin issuers, advisers and asset managers, as well as distributors of tokenized securities. A separate regulatory regime is also being established for VA advisory and VA management.

What are the consequences of illegal cryptocurrency activities in Hong Kong?

Operating without a license may result in a fine of up to HKD 5 million and imprisonment of up to 7 years. Money laundering may result in imprisonment of up to 14 years. AML/KYC violations may result in substantial fines and license suspension.

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