Hong Kong’s Evolving Framework for Digital Asset Regulation

1. Overview

Global finance is undergoing rapid technological transformation, and Hong Kong is leveraging this momentum to reinforce its role as a premier financial hub. With the launch of Policy Statement 2.0 in June 2025, Hong Kong Government reaffirmed its vision of establishing Hong Kong as a leader in digital asset innovation. Central to this vision is the “LEAP” framework, which focuses on regulatory clarity, product expansion, cross‑sector applications, and partnership development. These initiatives provide a strong foundation for the sustainable expansion of Hong Kong’s digital asset ecosystem.

As a result, Hong Kong has established itself as a frontrunner in the digital asset sector, standing apart from many jurisdictions that adopt only limited regulatory measures for the industry. This leadership is underscored by its recent recognition as the world’s top jurisdiction for fintech offerings in the Global Financial Centres Index.

2. Current Digital Asset Regulation

The regulation of digital assets in Hong Kong depends on the nature and characteristics of the digital asset and the type of services provided.

If a digital asset contains characteristics of a security as defined under the Securities and Futures Ordinance (Cap.571) (“SFO”), it is regulated by the Securities and Futures Commission (“SFC”) and other relevant laws and regulations. A digital asset is deemed a security if it functions like traditional securities (stocks, bonds, funds) under the Securities and Futures Ordinance (“SFO”), meaning it offers rights to profits, income, or represents ownership, often tested by how closely it mirrors traditional investment products like tokenized assets or stablecoins linked to real-world assets.

Digital assets that are deemed securities will be subject to laws concerning regulated activities (which attract licensing and authorisation requirements). An offering of securities in Hong Kong generally requires registration with the Hong Kong Companies Registry and a prospectus that satisfies the requirements of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (CWUMPO), unless one or more exemptions are available.

For non-security tokens, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”) serves as the primary legislation, setting out requirements for customer due diligence and record keeping. The Guideline issued by the SFC sets out the statutory and regulatory requirements for anti-money laundering and counter-financing of terrorism that must be complied with the AMLO and the SFO. Compliance with this Guideline is legally enforceable, and failure to comply may result in disciplinary or other enforcement actions under the AMLO and/or the SFO.

3. Definition of Digital Assets

Digital assets are defined under the legal regime as cryptographically secured digital representations of value. They function either as a unit of account or a store of economic value. Specifically, they may be used as a medium of exchange accepted by the public for payments, debt settlement, or investment, or they may provide rights and governance functions, such as voting on the management or administration of arrangements connected to the asset. Importantly, virtual assets are capable of being transferred, stored, or traded electronically, which makes them distinct from traditional physical assets.

This definition is wide, and the intention is that it will cover most forms of cryptocurrencies in the market. Nevertheless, under the AMLO, it excludes: (i) central bank digital currencies; (ii) securities or futures contracts; (iii) stored value facilities; (iv) limited purpose digital tokens; and (v) any other form which the SFC declares as not being a virtual asset.

4. Licensing Requirements

Stablecoins

Specific stablecoins, pegged to official currencies or other units of account designated by the HKMA, are regulated under the new Stablecoins Ordinance (Cap. 656) (“Stablecoins Ordinance”). The ordinance establishes a dedicated licensing and regulatory framework for stablecoin activities in Hong Kong.

Any person wishing to issue specified stablecoins must obtain a licence from the HKMA unless exempted. To qualify for a licence, issuers must meet statutory minimum conditions, including requirements relating to reserve assets, fitness and properness, risk management, and cybersecurity. The HKMA’s Supervision Guideline further clarifies that all minted stablecoins must be fully backed, even if frozen or blacklisted, and that reserve assets may include tokenised representations of eligible assets provided they meet standards of high quality, liquidity, and minimal risk.

Issuers are also subject to the AML/CFT Guideline, which treats third-party distributors as “customers” requiring enhanced due diligence, including assessment of their business nature and AML/CFT controls. Issuers must verify the ownership or control of customer wallets and conduct appropriate wallet screening to mitigate money laundering and terrorist financing risks. In addition, issuers must implement ongoing monitoring of stablecoins in circulation, though they are not required to monitor peer-to-peer transfers between unhosted wallets of non-customers.

It is important to note that the definition of “stablecoin” excludes financial products and instruments that are already subject to existing regulatory regimes, such as bank deposits, securities, futures contracts, limited purpose digital tokens, float stored in stored value facilities (SVFs) or SVF deposits, or central bank digital currencies.

Virtual Asset Trading Platform (VATP)

A VATP operator is a corporation that either operates a trading platform for digital assets in Hong Kong or actively markets its services to Hong Kong investors. Such platforms must obtain a licence under the SFO and AMLO.

To obtain a licence, platform operators must meet the SFC’s fit-and-proper test, demonstrating solvency, competence, integrity, and reliability, be incorporated or registered in Hong Kong, maintain a sound business structure and internal controls, appoint at least two responsible officers and ensure senior management accountability. Financial requirements include maintaining paid-up share capital of at least HK$5 million, liquid capital of at least HK$3 million or the statutory basic amount, and sufficient liquidity to cover 12 months of operating expenses.

5. Future Development

Digital asset specific regulatory policies and measures in Hong Kong have undergone rapid changes in recent years and are expected to continue evolving at a similar pace in the future.

Consultations and government publications indicate a clear trend toward broadening the scope of licensing requirements beyond virtual asset trading platforms, with the aim of regulating a wider range of industry participants and asset types. This direction is evident in the introduction of new licensing regimes for intermediaries engaged in virtual asset dealing or providing virtual asset custodian services. Additional consultations have also been issued on extending the regime to cover providers of virtual asset custody, advisory and management services.

Against this backdrop of rapid regulatory development, industry participants must remain vigilant and closely monitor policy developments to ensure timely and appropriate action.