Hong Kong finalises VA dealer licensing and consults on VA advisors/managers — how it compares to today’s Type 1/4/9 “VA uplift”

This document has been prepared by Charles Russell Speechlys LLP for informational purposes only. Refer here for the PDF version.

Hong Kong has signalled a decisive shift in the regulation of VAs. On 24 December 2025, the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) published consultation conclusions on a new licensing regime for virtual asset (VA) dealing service providers and on VA custodian services, and launched a further one-month consultation (closing 23 January 2026) on separate licensing regimes for VA advisory and VA management service providers, with legislation targeted for introduction in 2026 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The VA dealing scope is revised to align closely with Type 1 (dealing in securities) regulated activity (RA) under the Securities and Futures Ordinance (SFO), and the advisory/management proposals mirror the architecture of Type 4 and Type 9 RAs respectively.

In this article, we break down the critical pivot from today’s “VA uplift” terms and conditions governing Type 1/4/9 intermediaries under the SFC–HKMA Joint Circular¹ to the new proposed regime, providing the essential insights and key takeaways to assess scope, prepare for compliance, and transition smoothly ahead of implementation in 2026.

What’s changing: from uplift to purpose-built VA licences

The consultation conclusions mark a clear and deliberate shift in Hong Kong’s approach to VA regulation – and the implications are significant. Rather than continuing to rely on temporary “bolt-on” uplifts layered onto existing SFO licences, the regime is evolving toward a set of dedicated, activity-specific licensing frameworks under the AMLO. These new licences are designed to address the distinct risks and operational realities of each core VA activity—dealing, advisory, management, and custody—providing a more structured and scalable foundation for the market.

For the full picture, we set out the key requirements and features of the proposed regimes below:

VA Dealing Services

• The licensing trigger captures any person who, in the course of business, makes or offers to make agreements, or induces others to enter agreements, to acquire, dispose of, subscribe for, or underwrite VAs —closely mirroring the Type 1 (dealing in securities) RA under the SFO.
• Activities involving VA-referencing derivatives (e.g., futures or structured products) remain regulated under the existing SFO Types 1, 2, or 11 RAs to avoid overlap.
• Tokenised securities fall outside the AMLO definition of VA and continue to be treated as traditional securities.
• Margin trading is explicitly within scope, although detailed permissibility criteria and protective guardrails are still under review.
• Staking and VA borrowing/lending arrangements are under active consideration for potential inclusion.
• Peer-to-peer platforms and decentralised or technology-driven models will be evaluated on a substance-over-form basis, with the key determinant being whether the relevant services are carried on “by way of business.”

VA Advisory and VA Management Services (subject to the ongoing consultation closing 23 January 2026)

• Separate AMLO licences are proposed: one for “advising on VA” (aligned with SFO Type 4 RA) and one for “VA management” (aligned with SFO Type 9 RA).
• Advising on VA covers providing advice or issuing analyses/reports intended to facilitate clients’ decisions on acquiring or disposing of VAs.
• VA management encompasses discretionary management of portfolios invested in VAs, with no de minimis threshold (a significant departure from the current 10% per-portfolio uplift trigger).
• Exemptions will mirror those available under the corresponding SFO RAs, including intra-group advice/management, incidental advice/management, and carve-outs for generally available publications or broadcasts.

VA Custody Services

• A dedicated licensing requirement applies to entities that safekeep, control, or administer instruments (typically private keys) that enable the transfer of client VAs.
• Minimum financial resources are set at HK$10 million paid-up share capital and HK$3 million liquid capital.
• VA dealers will generally be expected to custody client VA with SFC-regulated VA custodians located in Hong Kong, reinforcing localisation of client asset protection.

Transition, fees and appeals

There will be no deeming arrangement on commencement; firms not in pre-application may need to pause operations on the go-live date. An expedited process will apply to SFC-licensed VA trading platforms (VATPs) and intermediaries already assessed and engaged in these activities. Fees will follow a user-pays approach benchmarked to Type 1 RA for VA dealing and to Types 4/9 RAs for advisory/management. Appeals will be handled by the Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal.

How this compares to today’s “VA uplift” for Types 1/4/9 RAs

Under the Joint Circular, Type 1/4/9 intermediaries today operate VA business under prescriptive “uplift” conditions: execution must generally occur through omnibus accounts at SFC-licensed VATPs, pre-funding is required, and token availability for retail is limited to large-cap indices. Intermediaries must satisfy AML/CFT and conduct safeguards, such as token due diligence, client knowledge and suitability frameworks, and segregation and custody usually via SFC-licensed VATPs/banks.

By contrast, the new AMLO regimes will stand up dedicated licensing for each VA activity, align financial resources with the closest SFO analogue, and mandate custody localisation for dealers via SFC-regulated VA custodians, while retaining flexibility to add excess liquid capital where warranted. The SFC is also pursuing its ASPIRe “Access” pillar, permitting intra-group shared order books at VATPs and exploring, over time, pathways to broader global liquidity with safeguards, though near-term dealing will still require local custody.

Focused comparison: uplift vs proposed VA licences (by key criteria)

Practical implications

Firms currently relying on the Joint Circular “VA uplift” should prepare to transition to purpose-built AMLO licences that more closely track SFO activity lines, with clearer scoping, aligned capital, and explicit custody localisation for dealers. Because there is no deeming, non-engaged providers risk business interruption at commencement; early pre-application engagement with the SFC/HKMA is strongly encouraged. At the same time, the SFC is signalling continued evolution on liquidity access under ASPIRe and dynamic custody standards for custodians, suggesting further calibration is likely as frameworks mature.

Why the new regimes represent a significant improvement over the existing bolt-on “uplift” approach

The transition from a patchwork of supplementary conditions attached to existing SFO licences to dedicated, purpose-built licences under the AMLO marks a fundamental enhancement in Hong Kong’s regulatory framework for VAs. This shift is intended to provide greater clarity in licensing triggers, more robust investor protections, a more resilient overall market structure, and reduced friction in day-to-day supervision.

Clearer triggers and scope

Under the current uplift regime, firms must interpret and apply a combination of Type 1/4/9 requirements alongside joint circulars and bespoke terms and conditions, which often leads to uncertainty about exactly when VA activities fall within the uplift and when they might trigger separate obligations. This is particularly evident in the Type 9 de minimis threshold, where the 10% VA exposure limit is calculated per portfolio rather than across a manager’s total asset under management (AUM). For example, a manager with a large traditional book could launch or manage a small dedicated 100% VA fund and still require uplift terms for that portfolio, even if the VA fund’s overall AUM represents far less than 10% of the manager’s total AUM. Market volatility can also cause unintended breaches if VA prices surge and push exposure above 10% unexpectedly. In contrast, the new regimes enshrine activity-specific triggers directly into primary legislation, making it explicit that certain models—such as dealing as principal, offering margin trading, engaging in VA borrowing and lending, or operating certain peer-to-peer or decentralised arrangements—require a dedicated AMLO licence rather than merely an uplift. For VA management in particular, the complete removal of any de minimis threshold eliminates these calculation ambiguities and drift risks entirely. This legislative codification minimises grey areas, reduces opportunities for regulatory arbitrage between the SFO and AMLO frameworks, and gives market participants far greater certainty about their licensing obligations.

Fit-for-purpose RO competence

RO competence under the uplift is addressed indirectly through terms and conditions layered onto existing SFO requirements, which can make accountability less straightforward. The new regimes, however, integrate fit-and-proper assessments directly into the AMLO licensing process, explicitly aligning competence expectations with the relevant SFO RA type (Type 1 for dealing, Type 4 for advisory, Type 9 for management), and will likely require demonstrable VA-specific knowledge, governance structures, and operational expertise tailored to the unique risks of VAs. This creates clearer lines of responsibility for senior management and ROs, strengthening overall accountability.

Codified, consistent compliance frameworks

Compliance obligations under the uplift are assembled from multiple sources—joint circulars, VATP standards, and individual terms and conditions—which can result in a fragmented and complex compliance landscape. The new regimes consolidate these requirements into a single, cohesive set of licence-specific rules that embed AML/CFT obligations, conduct standards, disclosure requirements, record-keeping, governance, token due diligence, and risk controls in one place. This unified approach not only simplifies compliance for licensed entities but also facilitates more consistent supervision and enforcement by the SFC.

Capital calibrated to activity, with buffers

Capital requirements in the uplift simply follow the underlying SFO rules with no additional VA-specific calibration, despite the distinct risk profile of VAs. The proposed regimes address this by benchmarking minimum paid-up and liquid capital to the closest SFO analogue while granting the SFC explicit discretion to impose higher buffers—for instance, requiring liquid capital equivalent to at least 12 months of operating expenses for higher-risk business models. This tailored calibration better supports institutional resilience and orderly wind-down in the event of stress.

Custody localisation and client asset protection

Client asset protection, particularly custody, reveals another key gap in the uplift framework, where intermediated custody relies primarily on SFC-licensed VATPs or banks but can lack robust enforceability for cross-border arrangements. The new dealing regime directly mandates the use of SFC-regulated VA custodians based in Hong Kong, thereby enhancing segregation, control, and recovery mechanisms for client assets. For VA management activities, the ongoing consultation explores flexible yet risk-appropriate custody options rather than imposing a rigid rule, allowing for more nuanced treatment depending on the nature of the funds involved.

Sharper, risk-based permissions

Many restrictions under the uplift are necessarily blunt instruments—such as mandatory omnibus execution, universal pre-funding requirements, and broad prohibitions on using client VAs for yield generation—which were appropriate as interim measures but can constrain legitimate innovation. The new regimes replace these with more granular, risk-based permissions and exemptions, including potential pathways for principal trading, intra-group activities, and everyday payment use cases, while explicitly contemplating safeguards for margin trading, staking, and VA lending/borrowing. This enables a wider range of sustainable business models without compromising investor safeguards.

Statutory review and appeal

Licensing and enforcement decisions under the uplift rely heavily on administrative circulars and conditions, which offer limited formal recourse. In the new regimes, decisions benefit from a statutory right of appeal to the dedicated Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal, providing greater due process and legal certainty for applicants and licensees.

Operational efficiency and market access

Operationally, the new framework aligns closely with the SFC’s broader ASPIRe roadmap, particularly the “Access” pillar, by establishing controlled mechanisms—such as intra-group shared order books—and signalling future pathways to broader global liquidity under appropriate safeguards. This contrasts with the current uplift’s more restrictive VATP-only execution model and offers a clearer evolutionary path for market development.

Transition certainty

Finally, the absence of grandfathering combined with an expedited approval process for already-assessed firms provides a clean and predictable transition timeline. Firms understand that they must migrate fully to the new licences, eliminating the prolonged uncertainty and dual-regime complexities that could otherwise persist.

Concluding Remarks

These developments elevate Hong Kong’s current regime from a cautious, interim approach to a more comprehensive and forward-thinking global framework.   Compared to the more restrictive environments in parts of the US, the still-evolving MiCA regime in the EU, or the principle-based but sometimes less prescriptive approaches in Singapore and the UAE, Hong Kong’s blend of clear scoping, robust safeguards, and progressive features—such as localised custody with pathways to global liquidity—positions it as an attractive, credible gateway for institutional crypto activity in Asia.  We look forward to how the finalised regimes for VA management and advisory regulated activity will shape up following further consultation – but from what we’ve seen in relation to the dealing regime, the future is looking promising for Hong Kong’s VA regulatory framework.