Hong Kong Virtual Asset Trading Platform License: SFC Application Requirements 2025

The Securities and Futures Commission (SFC) published its revised regulatory framework for virtual asset trading platforms (VATPs) on 4 December 2024, setting a 1 June 2025 deadline for all platforms operating in Hong Kong to be licensed or deemed licensed. This deadline marks the end of a transitional period that began in June 2023. Any platform that fails to submit a complete licence application by 29 February 2024, or does not receive a deemed licence by the June 2025 date, must cease Hong Kong operations. The SFC’s 2024 Annual Report, published in April 2025, recorded that 11 platforms had been granted licences as of 31 March 2025, with several more applications under review. The window for new entrants is narrowing, and the compliance bar has been raised significantly.

The Licensing Regime Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance

The primary legislation governing VATP licensing is the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), Cap. 615. The SFC administers this regime under Part 5B of the Ordinance, which came into effect on 1 June 2023.

Who Must Apply

Any person operating a business that provides a service of operating a virtual asset trading platform in Hong Kong must be licensed under AMLO. The definition of “virtual asset” under Schedule 1 of AMLO excludes central bank digital currencies and limited-purpose digital tokens, but covers most cryptocurrencies, stablecoins, and utility tokens traded on secondary markets. A platform that offers trading, custody, or exchange services in Hong Kong, or actively markets such services to the Hong Kong public, falls within the licensing requirement.

The SFC clarified in its 2023 Consultation Conclusions that a platform is deemed to be “operating in Hong Kong” if it maintains a physical office here, employs Hong Kong-based staff, or directs its marketing at Hong Kong residents. Offshore platforms that do none of these things may still be caught if they hold themselves out as providing services to Hong Kong users.

Two Licence Types: Type 1 and Type 7

The SFC issues two licences under AMLO for VATPs: a Type 1 (dealing in securities) licence and a Type 7 (providing automated trading services) licence. A VATP that offers trading in virtual assets that fall within the definition of “securities” under the Securities and Futures Ordinance (SFO), Cap. 571, must hold a Type 1 licence. A platform that operates an automated trading system for virtual assets must hold a Type 7 licence.

In practice, most licensed platforms hold both. The SFC’s 2024 Annual Report listed all 11 licensed platforms as holding Type 1 and Type 7 licences. A platform that only offers spot trading in non-security virtual assets may need only a Type 7 licence, but the SFC has indicated that it expects all platforms to apply for both to cover all eventualities.

The Application Process

Step 1: Pre-application consultation. The SFC encourages prospective applicants to engage in a pre-application meeting at least six months before submitting a formal application. This meeting covers the business model, proposed token listing criteria, custody arrangements, and compliance infrastructure.

Step 2: Submit the application. The application is made through the SFC’s e-licensing portal. The required documents include a business plan, a risk assessment, a token listing policy, a custody policy, a cybersecurity assessment, and audited financial statements. The application fee is HK$4,740 for each licence type.

Step 3: SFC review and site visit. The SFC conducts a desktop review of the application, followed by an on-site inspection of the platform’s Hong Kong office. The inspection covers governance, internal controls, client asset segregation, and system resilience.

Step 4: Licensing decision. The SFC aims to process complete applications within six months. If the application is approved, the platform is granted a licence subject to conditions. If refused, the applicant may appeal to the Securities and Futures Appeals Tribunal under section 217 of the SFO.

The Enhanced Regulatory Requirements for 2025

The SFC published its “Regulatory Requirements for Virtual Asset Trading Platform Operators” in December 2024, effective from 1 June 2025. These requirements apply to all licensed platforms and are more stringent than the 2023 interim measures.

Client Asset Segregation and Custody

Licensed platforms must hold client virtual assets in segregated wallets that are legally and operationally separate from the platform’s own assets. The SFC requires that at least 98% of client virtual assets be held in cold wallets, with only 2% in hot wallets for operational liquidity. The cold wallet private keys must be stored in Hong Kong, under the control of at least two authorised persons.

The SFC’s 2024 Annual Report noted that one platform was required to remediate its custody arrangements before receiving its licence. The regulator stated that it would conduct unannounced inspections to verify compliance with the cold wallet ratio.

Token Listing and Due Diligence

A licensed platform must have a written token listing policy that sets out the criteria for admitting virtual assets to trading. The policy must include a due diligence process covering the token’s technology, governance, liquidity, and legal status. The SFC has published a “Token Listing and Review Guidelines” that lists 15 specific due diligence items.

Stablecoins are subject to additional requirements. A platform may only list a stablecoin that is issued by a Hong Kong Monetary Authority (HKMA)-authorised issuer under the proposed stablecoin regime. The HKMA published its consultation conclusions on the stablecoin bill in December 2024, and the bill is expected to be enacted by mid-2025.

Investor Protection Measures

The SFC requires licensed platforms to assess each client’s knowledge of virtual assets before allowing trading. A client who fails the assessment may only trade in “non-complex virtual assets” as defined by the SFC. The platform must also provide a risk warning statement that the client acknowledges before the first trade.

For retail investors, the SFC imposes a leverage limit of 2:1 on margin trading. The platform must not offer any derivatives or structured products to retail clients unless those products are authorised by the SFC under the SFO.

The Transitional Arrangements and Deemed Licensing

The SFC’s transitional arrangements allow platforms that were operating in Hong Kong before 1 June 2023 to continue operating while their licence applications are processed.

The Deemed Licence Mechanism

A platform that submitted a complete licence application by 29 February 2024 is deemed to be licensed from 1 June 2024 until the SFC makes a final decision on its application. The deemed licence is subject to the same conditions as a full licence, including the requirement to comply with the SFC’s regulatory requirements.

The SFC’s 2024 Annual Report stated that 22 platforms had submitted applications by the February 2024 deadline. Of these, 11 had been granted licences as of 31 March 2025, four had withdrawn their applications, and seven were still under review.

What Happens After 1 June 2025

Any platform that does not hold a deemed licence or a full licence by 1 June 2025 must cease operations in Hong Kong. The SFC has stated that it will take enforcement action against unlicensed operators, including issuing cease-and-desist orders and referring cases to the Police for criminal prosecution. The maximum penalty for operating an unlicensed VATP is a fine of HK$5,000,000 and imprisonment for seven years under section 53ZZZD of AMLO.

Platforms that hold a deemed licence but have not received a full licence by 1 June 2025 may continue to operate under the deemed licence until the SFC makes a final decision. However, the SFC has warned that it will not grant indefinite extensions.

Practical Steps for Applicants

The application process is resource-intensive. A typical application takes 12 to 18 months from start to finish, including the pre-application consultation, document preparation, and the SFC’s review.

Step 1: Assess Eligibility

An applicant must be a Hong Kong-incorporated company with a physical office here. The company must have at least two responsible officers (ROs) who are licensed under the SFO. One RO must be a director of the company. The ROs must have at least three years of relevant experience in virtual asset or securities trading.

Step 2: Build the Compliance Infrastructure

The platform must have a compliance manual that covers AML/CTF procedures, client onboarding, transaction monitoring, and suspicious transaction reporting. The manual must be approved by the board of directors. The platform must also appoint an independent auditor to conduct an annual audit of its systems and controls.

Step 3: Engage Legal and Compliance Advisers

The SFC expects applicants to engage external legal counsel and compliance consultants who are familiar with the SFC’s regulatory framework. The SFC’s 2024 Annual Report noted that applications submitted without legal representation were routinely returned for resubmission.

Step 4: Prepare for the On-Site Inspection

The on-site inspection is the most intensive part of the application process. The SFC will test the platform’s systems, interview key personnel, and review transaction records. The platform must demonstrate that it can segregate client assets, maintain system integrity, and respond to a security breach.

Actionable Takeaways

• The SFC’s 1 June 2025 deadline is fixed; any platform not holding a deemed or full licence by that date must cease Hong Kong operations or face criminal penalties.
• The SFC requires licensed platforms to hold at least 98% of client virtual assets in cold wallets stored in Hong Kong under multi-signature control.
• Stablecoin listing is conditional on the issuer being authorised by the HKMA under the forthcoming stablecoin bill.
• The application process typically takes 12 to 18 months and requires at least two licensed responsible officers and a Hong Kong-incorporated company.
• Engaging experienced legal and compliance advisers before the pre-application consultation is a practical necessity, not an optional step.

This does not constitute legal advice. Consult a solicitor for your specific case.