Hong Kong`s Cryptocurrency Regulation: A Comprehensive Guide

Basic price of incorporation the company with crypto license authorization in Hong Kong starts from €40,000

Updates in the crypto-regulatory sector in Hong Kong

Hong Kong stands out as a prime destination for cryptocurrency transactions due to its legislative system, resilience of the economy and success in the field of technology development. It is worth noticing that the new licensing regime for Virtual Asset Trading Platforms (VATPs) came into operation on 1 June 2023 in Hong Kong. According to the regime, all centralized VATPs which carry on business in Hong Kong or actively market to Hong Kong investors must be licensed by the Securities and Futures Commission (SFC).

Hong Kong has a new licensing regime for VATPs from 1 June 2023

Step by step description

Step 1 – Initiating the process by obtaining pertinent documents from the client:

  • Performing an initial and comprehensive analysis of the project's specific requirements;
  • Assembling and verifying essential Know Your Customer (KYC) details along with a comprehensive and accurate business description;
  • Formulating and organizing the necessary documentation for the Power of Attorney (PoA);
  • Securing the client's criminal record certificate for compliance purposes.

Step 2 – Incorporation:

    There are several requirements that must be satisfied:
  • a company name must be selected (in English, Chinese or both languages);
  • an official legal address for the company must be registered in Hong Kong.
  • The cost of setting up a private company limited by shares - €4,000.

Important: there are no requirements for the minimum amount of share capital in Hong Kong.

Step 3 – AML/KYC procedural rules:

    Creation of individual set of documents including AML/CTF procedures, Risk assessment policy, KYC configuration with necessary levels of verification of individuals, legal entities, merchants.

Step 4 – Obtaining the license:

  • Submitting of the online application in the SFC;
  • Passing the test for compliance with the requirements of the regulator by the company;
  • Verification of the ultimate beneficiaries of the company and ROs for compliance with the requirements of the regulator.

Understanding Requirements in Hong Kong

One of the important Hong Kong acts in regulating activities related to virtual assets is the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) 2011 (AMLO) (amended 2022). This is Hong Kong’s first virtual asset specific legislation. Under the new regime, centralized VATPs operating in Hong Kong need to apply to the SFC for a license under the Securities and Futures Ordinance (Cap. 571) (SFO) and/or the AMLO.

VATPs need to obtain a license to do business in Hong Kong from the Securities and Futures Commission (SFC)

A crypto license in Hong Kong requires to have the company registered in Hong Kong with the AML/KYC policy, at least two Responsible officers (one of them must be a resident of Hong Kong) and to maintain in it at all times paid-up share capital of not less than HK$5,000,000 (~ €586,398)

Requirements for crypto license registration in Hong Kong

To get a crypto license and operate in Hong Kong, some compulsory requirements must be met:

    1. General fit and proper requirements:

  • financial status or solvency;
  • educational or other qualifications or experience;
  • ability to carry on the Relevant Activities concerned competently, honestly and fairly;
  • reputation, character, reliability and financial integrity of the applicant.
  • 2. Specific approval criteria:

  • a company must be incorporated in Hong Kong or an overseas company registered with the Companies Registry of Hong Kong;
  • to satisfy the SFC that the company has proper business structure, good internal control systems and qualified personnel to ensure the proper management of risks as described detailed in business plan;
  • not less than two Responsible officers should be appointed to directly supervise the conduct of Relevant Activities (at least one of them must be a resident of Hong Kong);
  • substantial shareholders, ultimate owners, officers and any other person who is or is to be employed by, or associated with, shall be fit and proper;
  • the company must have an AML/KYC policy;
  • all times paid-up share capital of not less than HK$5,000,000 (~ €586,398).

Taxes in Hong Kong

Hong Kong does not have specific legislation on the taxation of virtual assets.

Сapital gains tax is not payable in Hong Kong

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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.