On December 24, 2025, the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) jointly released consultation conclusions on legislative proposals to regulate virtual asset trading and custody services. At the same time, they kicked off a new one-month public consultation on setting up licensing regimes for virtual asset advisory and asset management service providers.
In 2023, Hong Kong updated the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to set up a legal licensing system for virtual asset trading platforms. To fill regulatory gaps, the FSTB and SFC launched a consultation in June 2025 regarding the regulation of trading and custody services under the AMLO framework. The two policy papers released this time are the official wrap-up and response to that June consultation. They clearly bring virtual asset trading and custody services into the licensing fold, outline the initial regulatory plan, and innovatively add "advisory services" and "asset management services" to the new licensing regime. This means Hong Kong is closing the loop on licensing for trading, custody, advisory, and asset management in the virtual asset market.
This article will break down the new regulatory requirements based on the two documents—"Consultation Conclusions on Legislative Proposal to Regulate Dealing in VA and Further Public Consultation on Legislative Proposal to Regulate Virtual Asset Advisory Service Providers and Virtual Asset Management Service Providers" and "Consultation Conclusions on Legislative Proposal to Regulate VA Custodian Services." We will analyze the core impact on the market and offer survival tips for the industry.
The two policy papers don’t just summarize the feedback from last June; they also propose expanding licensing to investment advisory and asset management. These systems are still moving through the legislative process and will officially kick in once the law is amended and passed.
This document wraps up the talk on trading services and drops two brand-new regulatory suggestions. First, it nails down the details for trading services, including the scope, money requirements, and transition plans.
l Scope: The definition of virtual asset trading services matches "Type 1 Regulated Activity (dealing in securities)" under the Securities and Futures Ordinance. Anyone buying or selling virtual assets for clients as a business—or encouraging those activities—needs a license. This includes running a matching platform, providing OTC (over-the-counter) brokerage, acting as an agent for client trades, or providing market-making services.
l Financial Requirements: Trading firms must meet the same financial standards as Type 1 licensed corporations. This means a minimum paid-up share capital of HK$5 million and a minimum liquid capital of HK$3 million. This effectively weeds out smaller, weaker platforms and makes the whole industry safer.
l Compulsory Custody: Licensed traders must hire an SFC-regulated virtual asset custodian to keep client assets safe. This ensures trading and custody stay separate, and self-custody of client assets is a no-go. For now, this rules out using overseas custodians, as the goal is to build a closed, controllable local custody ecosystem.
Second, it expands the target list under the AMLO framework to include new licensing requirements for "advisory" and "asset management" services.
Providing advice on virtual assets means giving investment tips on whether to buy or sell, which ones to pick, and how to do it, or publishing reports that drive decisions—basically acting like an investment advisor. This includes things like telling people when to buy/sell or suggesting portfolio mixes. Regulators plan to set specific rules for these players regarding money, staff expertise, compliance duties, and business limits. There will be exemptions for internal company services or incidental professional activities, similar to traditional finance.
Virtual asset management means managing a portfolio of virtual assets. The core features involve having the power to make investment decisions authorized by the client and providing portfolio management as a professional. Regulators say there won't be a minimum investment percentage exemption. Any entity managing a portfolio that invests in virtual assets—no matter how small the amount—must get a license or register. This is to stop risks from leaking into the market through unregulated advisory or management channels and to close loopholes where people might use traditional products to dodge specific virtual asset rules.
The "Consultation Conclusions on Legislative Proposal to Regulate VA Custodian Services" builds a safety net for holding virtual assets. It treats custody as the last line of defense for client asset safety and sets higher capital bars.
l Scope: The rules target entities that hold private keys or similar tools that can move client virtual assets. Independent third-party custodians need a specific license, though trading platforms' in-house custody units might get an exemption to avoid double-licensing. It also clears up who is responsible in the chain. For example, if a trading platform's sister company does custody, it needs its own license. Even banks or existing financial firms providing these services will fall under this framework.
l Financial Requirements: Custodians have a higher capital bar than traders. They need a minimum paid-up share capital of HK$10 million and a minimum liquid capital of HK$3 million. This ensures they have the cash to keep running and handle risks, reflecting the special nature of custody.
l Other Rules: Operating standards will follow traditional finance rules or current trading platform guidelines. This covers things like the ratio of online/offline storage, key management, insurance, and independent audits. For instance, they must use high levels of cold wallet storage but have the flexibility to adjust for withdrawals, balancing speed and safety. They also need strict multi-sig and tiered access controls, plus regular penetration and stress tests.
Hong Kong’s regulatory vibe has fundamentally shifted. It has gone from only licensing centralized exchanges (VATP) to a full-chain system covering trading, custody, advisory, and asset management. The VATP system focused on the "exchange" itself—dealing with capital and anti-money laundering—but left things like OTC, independent custody, and specialized management in a "grey area." This created risks and room for people to dodge the rules. These new independent licenses are a systematic fix to help grow a professional, stable market ecosystem.
The new rules use "hard constraints" that can be measured and audited to build trust. First, by setting capital bars similar to traditional banks (like HK$5M for traders and HK$10M for custodians), it filters out weak players and builds credit based on capital. Second, it creates a full regulatory loop. For regular and institutional investors, this framework provides legal and regulatory safety that is easy to understand and trust, just like traditional finance.
New rules always bring hurdles. For the market, small and medium service providers might find compliance really tough. High-risk global crypto capital might move to more flexible regions. For regulators, the pressure is on. They need to be experts and will likely be buried under a mountain of license applications. If they’re too slow, it could create a "compliance vacuum" that stalls legal business. They also need the tech skills to check out custody tech and new trading models.
In the short term, the strategy is "comply to survive, pivot to grow." Hong Kong is entering a "fully licensed" era. Web3 Participants need to figure out right now if their business counts as trading, custody, advisory, or management and start the application process. Some licenses won't have a transition period, so any delay could mean you're operating illegally once the law kicks in.
In the long run, players can turn "compliance" into their core edge. This means making anti-money laundering (AML) monitoring, secure custody, and transparent audits a normal part of business that goes beyond the bare minimum.
The move toward institutionalization will also have tax implications. Web3 Participants need to plan ahead for potential tax bills, like figuring out how their income is classified under the new rules. Higher compliance costs (like license and audit fees) might offer tax deduction opportunities, requiring careful policy tracking and record-keeping. As institutional clients join, providing audit-ready records and tax reports will become a basic service.
With this upgrade, we might see a market split between a few "all-in-one" giant groups with every license and many specialized providers in niche areas. Besides getting licensed, building up your "RegTech" skills or finding a specific niche to partner in will be the key to winning the next phase.
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