Operating a virtual asset exchange in Hong Kong has become a focal point for Web3 entrepreneurs seeking regulatory clarity and market access. With the Hong Kong Securities and Futures Commission (SFC) tightening oversight and updating its licensed platform list, understanding the licensing landscape is critical for compliance and long-term success.
In October 2024, the SFC added HKVAX to its official list of licensed virtual asset trading platforms—marking it as the third platform, alongside OSL Exchange and HashKey Exchange, to achieve full recognition. According to media reports, HKVAX holds both Type 1 (Securities Dealing) and Type 7 (Automated Trading Services) licenses, enabling it to offer OTC brokerage, crypto trading, and comprehensive custody services to investors.
This raises an important question: To operate legally in Hong Kong, must you obtain individual financial licenses—or is the Virtual Asset Trading Platform (VATP) license sufficient? Let’s break down the regulatory framework, clarify key distinctions, and identify exactly what’s required.
Understanding the Two Regulatory Frameworks
Hong Kong regulates virtual asset exchanges under two primary legal frameworks:
1. The Securities and Futures Ordinance (SFO)
This governs platforms dealing with security tokens—digital assets classified as securities. Under the SFO, operators need specific牌照 (licenses), particularly:
- Type 1 License: For dealing in securities, including tokenized equities or asset-backed tokens.
- Type 7 License: For providing automated trading services via electronic platforms—essential for any centralized exchange.
2. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)
This applies to platforms facilitating trades of non-security tokens, such as utility tokens or decentralized cryptocurrencies like Bitcoin and Ethereum. Compliance here leads to being granted a Virtual Asset Trading Platform License (VATP).
Crucially, because a digital asset can shift between "security" and "non-security" status based on structure or use case, the SFC strongly advises platforms to apply under both regimes. This dual approach ensures uninterrupted operations regardless of asset classification changes.
Current Licensed Platforms: Who Holds What?
As of late 2024, only three platforms—OSL Exchange, HashKey Exchange, and HKVAX—hold both Type 1 and Type 7 licenses and formal VATP permission. However, several others are listed as “deemed licensed” under AMLO, meaning they’re operating under temporary authorization.
These include:
- HKbitEX
- PantherTrade
- Accumulus
- DFX Labs
- Bixin.com
- EX.IO
- YAX
- Bullish
- Crypto.com
- WhaleFin
- Matrixport HK
⚠️ Important: “Deemed licensed” status comes with strict limitations. These platforms may only serve professional investors, cannot offer leveraged trading or derivatives, and are barred from retail-facing services like staking or lending.
This highlights a key insight: holding the VATP license alone isn’t enough for broad market access. True operational freedom requires SFO licensing, especially Types 1 and 7.
Core Financial Licenses for Virtual Asset Businesses
Beyond the VATP permit, here’s a breakdown of relevant SFC licenses under the SFO:
| License Type | Purpose |
|---|---|
| Type 1 | Securities dealing – required if your platform lists security tokens |
| Type 4 | Providing investment advice – needed for crypto advisory services |
| Type 7 | Automated trading systems – mandatory for all centralized exchanges |
| Type 9 | Asset management – essential for crypto fund managers |
Other licenses (Types 2–3, 5–8, 10) apply less frequently in the Web3 context but may be relevant for niche financial products.
So, Which Licenses Do You Actually Need?
You don’t need all ten. Focus on your business model:
- Exchange-only operator? Apply for Type 1, Type 7, and VATP permission.
- Crypto fund manager? Prioritize Type 9, which allows securities trading and advisory activities without separate Type 1 or 4 licenses.
- Hybrid platform (trading + advisory + asset management)? Look at HashKey Group’s model: multiple entities holding Types 1, 4, 7, and 9 licenses across subsidiaries.
Practical Steps to Get Licensed
- Incorporate a Hong Kong company with robust governance structures.
- Hire qualified compliance officers—at least one must be SFC-approved.
- Develop comprehensive AML/CFT policies, risk management systems, and cybersecurity protocols.
- Submit application to SFC for relevant licenses (e.g., Type 1 & 7) and AMLO registration.
- Undergo due diligence, site visits, and technical reviews.
- Maintain ongoing reporting and audit requirements post-approval.
The process typically takes 9–15 months, depending on preparedness and responsiveness to SFC queries.
Frequently Asked Questions (FAQ)
Q: Is the VATP license the same as an SFC financial license?
No. The VATP license falls under AMLO and covers non-security token trading. It does not replace SFO licenses like Type 1 or Type 7, which are needed for regulated financial activities.
Q: Can I serve retail investors with just a VATP license?
Not yet. Only platforms with full SFC licensing (like OSL and HashKey) can serve retail clients. “Deemed licensed” platforms are restricted to professional investors only.
Q: Do I need a license if I’m based outside Hong Kong but target local users?
Yes. If you actively market services to Hong Kong residents or allow HK IP access, you fall under SFC jurisdiction.
Q: Can a Type 9 license holder manage crypto portfolios without other licenses?
Yes. A properly authorized asset manager under Type 9 can invest in virtual assets and provide related advice without needing Type 1 or Type 4 separately.
Q: What happens if I operate without a license?
Unlicensed operation violates Hong Kong law. Penalties include fines up to HK$5 million, imprisonment for up to 7 years, and permanent business bans.
Q: Are stablecoins considered securities?
It depends on design. Algorithmic or yield-bearing stablecoins may be deemed securities; fiat-collateralized ones usually aren’t—but regulators assess case by case.
Final Thoughts: First Mover Advantage in a Regulated Market
As of October 2024, only three platforms offer fully compliant virtual asset trading services directly to Hong Kong investors. Most traditional financial institutions partner with these licensed exchanges rather than building in-house solutions.
This creates a clear window of opportunity: the first movers who secure dual SFO and AMLO approvals will dominate market share, build trust, and shape industry standards.
For Web3 founders aiming to enter Asia’s most sophisticated financial hub, understanding the interplay between the VATP license and traditional financial牌照 is not optional—it’s foundational.
👉 Start your compliant entry into Hong Kong’s regulated crypto market today.
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