14 July 2022

Do you need a licence? The SFC to licence virtual asset service providers in Hong Kong

On 24 June 2022, the Hong Kong government published the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 in the Gazette. The Amendment Bill introduces a new licensing regime which requires virtual asset service providers (VASPs) to obtain a licence from the Securities and Futures Commission (SFC) in order to operate a virtual asset exchange in Hong Kong. Licensed VASPs will be subject to the requirements stipulated by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) and other requirements to be published and regulated by the SFC. The new regime will come into effect on 1 March 2023.   

    

Scope of the Regime

The Regime requires VASPs to be licensed with the SFC. A VASP is a person who, as a business, provides a "VA service". "VA service" generally means the operation of a VA exchange through electronic facilities. VA is defined in the Amendment Bill to mean a cryptographically secured digital representation of value that is:

  • Expressed as a unit of account or a store of economic value which (i) is either used (or intended to be used) as a medium of exchange accepted by the public for the payment of goods, services, discharge of a debt, or investment, or provides rights, eligibility or access to vote on the management, administration or governance of the affairs in connection with, or to vote on any change of the terms of any arrangement applicable to, any cryptographically secured digital representation of value, (ii) can be transferred, stored or traded electronically, and (iii) satisfies other characteristics prescribed by the SFC. 
  • Other assets that are prescribed to be a VA by the Secretary for Financial Services and the Treasury.

Licensing requirements

Commencement and transitional period

What's next