Overview of Crypto Asset Regulation Series (7): Hong Kong, from Trading Platform Licenses to Stablecoins and Full-Chain Regulation

Introduction

On April 10, 2026, the Hong Kong Monetary Authority issued the first two stablecoin issuer licenses under the Stablecoins Ordinance. More than a month later, the Hong Kong Securities and Futures Commission published a related circular explaining how licensed virtual asset trading platforms and licensed corporations may offer these two types of licensed stablecoins to clients. Issuance, trading, client onboarding, and asset custody were thereby connected end to end.

Hong Kong currently does not have a single unified code governing all crypto asset activities. Security tokens continue to fall under the Securities and Futures Ordinance (Cap. 571); non-security virtual asset trading platforms are subject to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615, hereinafter the "AMLO"); and the issuance of fiat-referenced stablecoins is governed by the Stablecoins Ordinance (Cap. 656), which took effect in August 2025. The HKMA oversees stablecoin issuance and the banking system, while the SFC oversees trading platforms, licensed corporations, and capital market activities.

New licenses for trading, custody, advisory, and asset management are still undergoing legislative progress. When understanding Hong Kong's regime, it is necessary to first separate provisions already in effect from those under consultation, and then examine who controls assets, orders, and client relationships for each business line. This article maps out this regulatory landscape in the order of "asset classification—trading platforms—stablecoins—intermediaries—proposed licenses."

1. Determine the Asset First, Then the Activity

Schedule 1, Part 1 of the Securities and Futures Ordinance defines "securities" and "collective investment schemes," while Schedule 5 lists regulated activities. When a token represents shares, debt, fund units, or collective investment interests, its issuance and promotion, brokerage and trading, automated trading, and asset management will respectively connect to Type 1, Type 4, Type 7, or Type 9 regulated activities. Section 114 of the Securities and Futures Ordinance sets out the licensing requirement for carrying on regulated activities, while Section 116 provides the basis for granting a corporate license.

A large volume of spot crypto assets does not fall within the definition of "securities," so centralized trading platforms instead enter Part 5B of the AMLO. Section 53ZRA of the AMLO defines "virtual asset," and Section 53ZR together with Schedule 3B classifies operating a virtual asset exchange as a "virtual asset service." Section 53ZRD prohibits operating or claiming to operate a virtual asset service without a license, and Section 53ZRK provides for the SFC to grant a virtual asset service provider license to an eligible corporation.

Hong Kong also incorporates overseas solicitation into its licensing boundary. Section 53ZRB of the AMLO provides that where an overseas institution actively promotes to the Hong Kong public a business that, if provided in Hong Kong, would constitute a virtual asset service, it may be regarded as providing that service in Hong Kong. Servers and place of incorporation are only part of the facts; Chinese-language advertising, offline events in Hong Kong, HKD payment channels, and client support for local users will all enter the assessment.

The same platform will typically apply for two sets of licenses simultaneously. If it trades security tokens, it needs to obtain a Type 1 securities dealing and Type 7 automated trading services license under Section 116 of the Securities and Futures Ordinance; if it trades non-security virtual assets, it needs a virtual asset service license under Section 53ZRK. The two sets of licenses allow the platform to continue operating the corresponding business even when the legal nature of a token changes.

Fiat-referenced stablecoins have yet another separate entry point. Sections 3 and 4 of the Stablecoins Ordinance respectively define "stablecoin" and "specified stablecoin," while Section 5 defines "regulated stablecoin activity." At the current stage, core activities include operating the issuance of specified stablecoins in Hong Kong, as well as issuing outside Hong Kong specified stablecoins that claim to maintain a stable value by reference to the Hong Kong dollar. Issuance activities are handled by the HKMA, and only after entering trading and client services do they connect with the SFC regime.

2. How Virtual Asset Trading Platforms Obtain Licenses

Hong Kong's virtual asset trading platform regime has been in operation since June 2023. Applicants must apply in the form of a corporation, with responsible officers, directors, and ultimate controllers subject to a fit-and-proper review. The SFC examines shareholder and management backgrounds, business plans, financial resources, information security, client asset arrangements, and anti-money laundering systems. Section 53ZRK authorizes the SFC to grant a license when the applicant and relevant persons are fit and proper and the company is able to comply with statutory requirements.

Financial thresholds are set out in the Guidelines on Operators of Virtual Asset Trading Platforms. Paragraph 6.1 of the Guidelines requires the platform to maintain in Hong Kong liquid assets equivalent to at least 12 months of actual operating expenses; Paragraph 6.2 requires paid-up share capital of not less than HK$5 million; Paragraph 6.3 requires liquid capital of at least HK$3 million or the basic amount under the Financial Resources Rules, whichever is higher. Platforms are required to calculate these on an ongoing basis and submit financial returns to the SFC.

Corporate governance also has specific requirements. Paragraphs 3.4 and 3.7 of the Guidelines include corporate governance, internal controls, risk management, and compliance in the competency assessment; Paragraphs 11.4 to 11.19 further require clear reporting lines and independent risk management, compliance, and internal audit functions. A platform's technology, custody, and market surveillance are typically spread across multiple teams, and the SFC uses these roles and reporting relationships to confirm who bears responsibility.

Once a platform opens to retail clients, token admission becomes a day-to-day regulatory focus. Paragraph 7.1 of the Guidelines requires the establishment of a token admission and review committee; Paragraph 7.6 requires review of the project team, regulatory status, supply and liquidity, technology, governance, legal and money laundering risks before listing; Paragraph 7.10 requires smart contract tokens to undergo independent security audits; and Paragraphs 7.11 and 7.12 require ongoing review of token risks and changes in their securities attributes.

Assets offered to retail clients must also comply with Paragraphs 7.7 and 7.8. Generally, a token should have high liquidity and be included in a large-cap virtual asset index by at least two independent qualified index providers, at least one of which should also have experience with traditional securities market indices. After 2025, the SFC gradually adjusted certain product thresholds; licensed stablecoins obtained a more direct retail channel in 2026, with specific arrangements explained below.

3. How Client Assets Are Custodied

Trading platforms simultaneously perform trading and custody functions, so client assets are subject to a separate set of rules. Paragraph 10.1 of the Guidelines requires the platform to hold client assets in trust through an affiliated entity, and that affiliated entity may only engage in the business of receiving and holding client assets on behalf of the platform. Paragraph 10.5 requires client virtual assets to be stored in segregated wallets established by the affiliated entity and kept separate from the proprietary assets of the platform and the affiliated entity.

Paragraph 10.6(c) requires the platform and its affiliated entity to place 98% of client virtual assets in cold storage, with any deviation requiring case-by-case SFC approval. Paragraphs 10.6(e) and 10.8 further set out requirements for key generation, authorization, backup, and access control; keys and their backups should be securely stored in Hong Kong, and no single person should be able to control complete key material. Paragraph 10.10 incorporates whitelisting, abnormal withdrawal handling, authorization review, and anti-tampering of withdrawal addresses into operational requirements.

These provisions determine the wallet architecture of licensed platforms. Hot wallets retain only the assets needed to meet daily withdrawals, with most balances moved to an offline environment; platforms need to record who can initiate transactions, who is responsible for review, and how assets will be migrated in the event of a private key leak. The SFC's custody circular issued in 2025 further sets minimum standards for hardware security modules, air-gapped devices, whitelisting, and management responsibility.

Anti-money laundering obligations derive from Schedule 2 of the AMLO and the SFC's AML guidelines for licensed corporations and virtual asset service providers. Customer identification, beneficial owner verification, ongoing monitoring, suspicious transaction reporting, and record-keeping all cover platform operations. Sections 53ZRT to 53ZRX also set out ongoing obligations for licensed service providers and their affiliated entities, including approved premises, responsible officers, and client asset arrangements.

4. What the Stablecoins Ordinance Covers

Section 8 of the Stablecoins Ordinance is the core prohibition provision for issuance licenses. Any person operating or claiming to operate a regulated stablecoin activity must obtain an HKMA license or qualify for an applicable exemption; a violation of Section 8 may constitute a criminal offense. Section 15 is the legal basis for the HKMA to grant a license, and applicants must continuously satisfy the minimum criteria set out in Schedule 2.

Section 4 of Schedule 2 requires issuers to have sufficient financial resources and liquid assets, with paid-up share capital of at least HK$25 million, or equivalent financial resources acceptable to the HKMA. Section 5 requires issuers to establish a separate pool of reserve assets for each type of specified stablecoin, with the market value of reserves at all times at least equal to the face value of stablecoins in circulation and segregated from the issuer's other funds and other reserve pools. Reserve assets should be of high quality, high liquidity, and low investment risk, and subject to independent attestation and audit.

Section 6 of Schedule 2 directly grants redemption rights to holders. Issuers must redeem stablecoins at face value, with reasonable redemption conditions and reasonable fees; upon receiving a valid request, they should pay holders in the reference currency as soon as possible. Section 3.2 of the HKMA's Guideline on Supervision of Licensed Stablecoin Issuers further requires issuers to establish an effective redemption mechanism and to address holders' rights to the reserve asset pool and any shortfall in the event the issuer enters insolvency proceedings.

Section 11 of Schedule 2 requires issuance arrangements to be prudent and sound and to match the business purpose, business model, and operational structure. Section 4.3 of the supervisory guideline accordingly requires issuers to submit an executable business plan, maintain a reliable issuance mechanism, and demonstrate the ability to handle business disruptions. Reserves, redemption, technical security, risk governance, and anti-money laundering thus form a set of ongoing operational requirements.

Sales channels for stablecoins are also restricted. Section 9 of the Stablecoins Ordinance provides that only "permitted offerors" may offer specified stablecoins to clients. Licensed stablecoin issuers, SFC-licensed virtual asset platforms, Type 1 licensed corporations, authorized institutions, and stored value facility licensees are the main permitted offerors. Stablecoins issued by licensed issuers can be offered to retail clients through these institutions; specified stablecoins without a Hong Kong license can only be offered to professional investors under statutory conditions.

5. How the First Licensed Stablecoins Enter the Market

The SFC circular dated May 27, 2026 refers to stablecoins meeting two conditions as "relevant stablecoins": they are specified stablecoins under the Stablecoins Ordinance and are issued by an HKMA-licensed issuer within the scope of its license authorization. After the first two licenses were issued, trading platforms and licensed corporations could arrange client services in accordance with this circular.

Paragraph 4 of the circular removes the general liquidity and index requirements for relevant stablecoins when offered to retail clients, that is, part of the thresholds under Paragraphs 7.7 and 7.8 of the Guidelines on Operators of Virtual Asset Trading Platforms. The reason is clear: reserves and redemption are already subject to ongoing HKMA supervision, and the SFC brings the regulatory outcome at the issuance end into the trading end. Platforms must still complete token due diligence and disclose the stabilization mechanism, reserve, and redemption arrangements in accordance with Paragraph 5 of the circular.

Client onboarding has also been adjusted. Paragraph 6 of the circular provides that if an institution only provides relevant stablecoin services to a particular client, it may be exempt from the general virtual asset knowledge assessment; Paragraph 7 allows relevant stablecoin holdings to be excluded from a client's virtual asset risk limit; Paragraph 8 continues to require institutions to fulfill suitability obligations when actively soliciting or recommending. Once a client begins trading other virtual assets, the full knowledge assessment and risk controls apply immediately.

The scope of cooperation for licensed corporations has also expanded. Paragraph 9 of the circular allows them to cooperate with HKMA-licensed stablecoin issuers to provide trading services; Paragraph 10 allows licensed corporations to serve retail clients through platform omnibus account services subject to a "professional investors only" condition, with the licensed corporation bearing retail onboarding and suitability responsibilities. Paragraph 11 also allows clients to receive and pay relevant stablecoins through segregated accounts established with the issuer.

Paragraph 12 addresses listing notification. Platforms and licensed corporations do not need to obtain prior written SFC approval each time before introducing relevant stablecoins, but they must notify the SFC in writing in advance of plans to add, suspend, or remove them. Issuers are responsible for reserves and redemption, platforms are responsible for token admission and market operation, and licensed corporations are responsible for client relationships and suitability, so the responsibilities of the three parties connect around a single stablecoin.

6. Where Banks and Licensed Corporations Stand

Hong Kong banks are authorized institutions under Section 2(1) of the Banking Ordinance. When banks provide virtual asset trading, distribution, and account services, they remain subject to HKMA prudential supervision and comply with joint circulars issued by the HKMA and the SFC. Client suitability, anti-money laundering, technology risk, and complaint handling are borne by the client-facing bank, while underlying transactions are usually completed through SFC-licensed platforms.

Licensed securities corporations primarily conduct business under Section 116 of the Securities and Futures Ordinance and their license conditions. Paragraphs 17 to 31 of the 2023 joint circular set out cooperation models, client assessment, and notification obligations for virtual asset trading, advisory, and asset management. Licensed corporations may execute trades for clients through platform omnibus accounts, or, after obtaining the relevant license conditions, provide advisory services or manage investment portfolios containing virtual assets.

The relevant stablecoin circular further separates the client interface from underlying execution. Platforms subject to professional investor restrictions may accept retail orders from licensed corporations, with the licensed corporation responsible for client knowledge, suitability, and product explanation, and the platform responsible for trade execution, token review, and asset custody. Large financial groups can therefore place banking, securities brokerage, and platform arrangements in different entities and connect responsibilities through account segregation, data transmission, and incident reporting.

7. Custody, Trading, Advisory, and Management Licenses Are Being Completed

Hong Kong published consultation conclusions on virtual asset custody and trading services in December 2025 and continued to advance advisory and asset management regimes in 2026. The relevant bills have not yet completed the legislative process, so there are currently no directly applicable effective section numbers. The consultation conclusions have already established the main direction of the proposed regime, which is intended to continue placing new licenses into the AMLO, with the SFC responsible for supervision.

The custody license defines its scope around "who controls the tools for transferring assets." Institutions that hold private keys, seed phrases, or other tools capable of transferring virtual assets for clients will fall under the proposed license; if a software or hardware provider only provides technology without controlling client assets, the assessment will be based on the actual service structure. Proposed licensees must also satisfy requirements on local presence, fit and proper persons, client asset segregation, key governance, insurance or compensation, audit, and business continuity.

The trading services license is intended to cover buying and selling activities beyond centralized platforms, including brokerage matching, over-the-counter trading, and executing orders for clients. The regime focuses on who receives orders, who determines the counterparty, who handles client funds, and who actively promotes to the Hong Kong market. The current Section 53ZRD mainly covers operating a virtual asset exchange, while the new regime will bring more trading intermediaries into licensing and anti-money laundering requirements.

The advisory and asset management regime addresses advice and investment discretion. A policy paper published in May 2026 plans to bring virtual asset advisory and management services into a more complete statutory licensing framework. Institutions that recommend specific assets to clients, decide investment portfolios on their behalf, or control rebalancing and risk limits will be regulated according to the functions they actually perform. Existing Type 4 and Type 9 licensed corporations and their license conditions will continue to connect with the new regime.

Tokenized securities remain within the securities law framework. When they represent traditional securities rights, custody, trading, and management continue to be subject to the Securities and Futures Ordinance, product authorization conditions, and licensed corporation rules. In 2026, the SFC introduced a secondary trading framework for tokenized SFC-authorized investment products, focusing on consistency between token registration and underlying rights, technical arrangements, liquidity, and investor disclosure.

8. Tokenized Products and Settlement Infrastructure

As of March 2026, Hong Kong had multiple tokenized public offerings, with assets under management of tokenized shares of approximately HK$10.7 billion. The secondary trading framework announced by the SFC in April allows eligible products to explore longer trading hours through regulated channels. The issuance, registration, and transfer of fund units are gradually moving on-chain, while legal fund rights continue to be confirmed by the original product documents and the securities regulatory regime.

The HKMA's Project Ensemble addresses another layer of issues: how tokenized deposits, tokenized assets, and settlement funds are exchanged within the same infrastructure. Priorities in 2026 include advancing EnsembleTX and experimenting with tokenized central bank money to support round-the-clock settlement. Bank liabilities, stablecoins, and tokenized securities each have their own issuers and legal rights, and Ensemble attempts to provide a controlled environment for connectivity and settlement.

This infrastructure path and the licensing regime work in coordination. Stablecoin issuers are responsible for reserves and redemption, banks are responsible for tokenized deposits, securities issuers and fund managers are responsible for underlying investment rights, and platforms and custodians are responsible for trading and asset security. Only after the legal responsibilities of each type of asset are determined can cross-platform delivery and settlement have a stable foundation.

9. Author's Note

Hong Kong's virtual asset regime has formed a three-layer structure. The first layer continues to apply securities law and banking law, determining regulation based on the rights a