Why Choose Hong Kong for a Crypto License
Early in 2025, Hong Kong launched its first tokenized retail funds, quickly attracting over USD 700 million.
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Clear regulatory framework under SFC
From June 2023, all exchanges serving Hong Kong clients must have a Securities and Futures Commission (SFC) license for security or utility tokens. AMLO and SFO require clear internal controls, audits, and a solid compliance plan. The 2025 policy update showed Hong Kong’s focus on transparency and stability in crypto.
Business-friendly, tax-efficient environment
Corporate tax is 8.25% on the first HKD 2 million of profits and 16.5% on the amount exceeding that. However, under certain conditions, corporate tax on foreign income can be reduced to 0. Individuals pay up to 17% income tax. However, there’s no VAT, capital gains or dividend tax, and no currency controls, making foreign investment easy. The government also supports startups with grants, R&D aid, and sandbox programs for blockchain and AI testing.
Access to Asia-Pacific financial markets
Hong Kong Crypto License Requirements
Virtual Asset Service Provider (VASP) licensing
Both local and foreign companies need a VASP license from SFC to operate in Hong Kong. You must register locally, have enough capital, and qualified staff. Handling fiat money means an extra Money Service Operator (MSO) license is needed.
The SFC explains these rules clearly in its Guidelines for Virtual Asset Trading Platforms. Also, if your platform handles fiat currency, you'll need an additional MSO license from Hong Kong Customs.
Responsible Officers
Licensed VASPs must have at least two SFC-approved Responsible Officers (ROs). ROs must be registered, pass exams and background checks, and have relevant experience and qualifications like CFA or FRM, reputation, financial standing, and no criminal record.
At least one RO must oversee the platform locally in Hong Kong. ROs approve key policies, budgets, cybersecurity measures, audits, and incident responses. Senior management ensures overall platform integrity. Internal audits are mandatory, and the SFC may inspect at any time.
AML/CFT procedures and cybersecurity controls
AML/CFT rules require user verification, continuous transaction monitoring, and prompt reporting of suspicious activities. For cross-border transfers over HKD 8,000, log and verify both sender and receiver (Travel Rule, according to Article 13A of the AMLO).
Regulatory Authorities and Legal Framework
SFC oversight
Getting licensed starts continuous SFC supervision: regular updates, system audits, disclosure obligations, and staying ahead of changing rules.
- No lending or staking with customer assets, not even on opt-in.
- All material changes (ownership, senior personnel, new tokens) must be pre-cleared.
- Your compliance team must act before problems arise, not after. And yes, technology infrastructure matters including cybersecurity logs, API security, and real-time transaction monitoring.
AML & Counter‑Terrorism Financing Ordinance (Amendment 2022)
In 2022, Hong Kong made it official: crypto platforms are now regulated like banks. The updated AMLO brought VASPs fully under financial regulations. The same rules apply as for VASPs, including licensing, AML/CFT compliance, and leadership vetting. And if the SFC comes knocking or sends you a request, you need to reply quickly. Silence, delay, or missing records? That alone can trigger enforcement.
SFO exclusions and token classifications
Regulation depends on token function: security-like tokens fall under SFO, however utility tokens usually don’t but need careful classification. If your token gives profit shares, voting rights, or future revenue, it’s likely a security token. Tokens that track asset prices, use leverage, or act like derivatives also are regulated under SFO.
Some sales are exempt from regulation: private placements (<50 people), sales to professional investors, and certain structured products. Regular spot trades without leverage are generally outside SFO regulation.
Types of Crypto Licenses in Hong Kong
Hong Kong’s crypto licensing is clear but strict. The license you need depends on what services your business offers.
Exchange/Trading Platform License
To run a centralized exchange, you’ll need both Type 1 (Securities Dealing) and Type 7 (Automated Trading) licenses if you trade security tokens. Additionally, all platforms handling virtual assets require a VASP license under the updated AMLO. Retail access is allowed but under tight rules. Only 2% of a client's funds can be in hot wallets, the rest must be stored cold. Strong custody policies, cybersecurity, and internal controls are mandatory.
Application Process and Timeline
Market entry declaration and fit-and-proper test
Before applying, your board must approve the virtual-asset license. Applications for the company and key people (ROs, directors) go through the SFC’s online WINGS system.
The key step is the fit-and-proper test. The SFC checks the company and leadership’s financial health, integrity, experience, and past compliance—especially around AML and fraud. Weaknesses here usually block approval.
Submission of responsible officers and premises details
As we mentioned previously you’ll need at least two ROs: one must be an executive director, and one must live in Hong Kong. If you’ve got more than one executive director, all of them must be ROs.
- Forms for company and licensed individuals
- Business plan
- Internal policies and manuals
- Phase 1 Assessor report
- Application fee’s payment
The SFC requires a physical Hong Kong office they can inspect.
Compliance program review and license conditions
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The SFC looks closely at your governance, controls, AML, custody, cybersecurity, and risk management. If anything’s weak like incomplete KYC or unclear custody rules they may give conditional approval or reject you until fixed.
Some conditions apply by default:
- No proprietary trading or market making
- No margin or derivatives trading
- Retail users can’t trade stablecoins yet
Only liquid, non-security tokens are allowed for retail users
Regulatory evaluation process and timeline (~12 months)
Getting a license takes roughly a year. Here’s the general flow (Chapter 6 of Licensing Handbook for Virtual Asset Trading Platform Operators):
- Submit full application, manuals, and Phase 1 assessment
- SFC does preliminary review
- If successful, you get approval-in-principle and can start limited operations
- Complete Phase 2 assessment within 12 months
- SFC grants full license after final checks
The SFC may ask for extra details or add conditions during the process
Cost and Capital Requirements
Before you start creating a cryptocurrency platform in Hong Kong, you need to answer one important question: how much does it actually cost to obtain a license?
Application fee and regulatory deposit
Here’s what you’ll pay to get licensed by the SFC:
- HKD 4,740 for each regulated activity (most platforms apply for two: Type 1 and Type 7, so about - HKD 9,480 total).
- HKD 1,790 per activity for each Licensed Representative on your team.
- HKD 2,950 per activity for each RO (senior managers in charge of compliance).
These fees are set and no hidden costs.
You don’t have to pay a big regulatory deposit upfront. But you do need to protect your clients’ assets with insurance or a compensation fund that covers:
- 100% of assets in hot wallets
- At least 50% of assets in cold storage
Client funds should be held in a Hong Kong bank account, managed by a licensed custodian meeting SFC standards.
Minimum share capital and financial resource criteria
Your platform must have at least HKD 5 million in paid-up share capital, and keep it that way at all times.
You also need liquid assets of at least HKD 3 million (cash or equivalents), sometimes more depending on your operating costs. You must hold enough Hong Kong-based liquid assets to cover 12 months of expenses, reviewed regularly.
Virtual assets don’t count toward these requirements. Reserves must be held in cash or similar assets, owned by your company and kept in Hong Kong.
Ongoing supervision and annual fees
- HKD 4,740 per regulated activity
- HKD 4,740 per activity for each RO
- HKD 1,790 per activity for each Licensed Representative
Fees are paid via the SFC WINGS platform on your license anniversary.
You will also have regular compliance work to be done:
- Submit monthly business reports within two weeks after month-end, covering client flows, asset movements, and platform activity
- Have your operations audited annually by a certified auditor. The first audit is due within 18 months of licensing, then within four months after each financial year.
Compliance and Operational Obligations
On‑site record‑keeping and data storage
All client and transaction records must be stored in Hong Kong. Platforms must record client details before running a transaction locally like identity, source of funds, and transaction info.
Electronic records (trading logs, KYC files) must be kept in Hong Kong data centers or cloud services approved by the SFC (Section 130 of the Securities and Futures Ordinance and Section 53ZRR of the Anti-Money Laundering Ordinance).
Wallet keys for client assets also need secure storage in Hong Kong, no overseas key management allowed.
Reporting suspicious transactions and adherence to Travel Rule
The Travel Rule requires platforms to collect and share details about virtual asset transfers, including:
- Full legal names of sender and receiver
- Account or wallet IDs
- Additional IDs like passport numbers
From January 1, 2024, this info must be shared in real time.
Private wallet transfers need the same data and extra checks, and can be delayed or refused.
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"Their adept use of technology for communication and project management streamlined the entire process."
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