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Crypto License in Hong Kong

Inteliumlaw » Crypto licenses » Crypto License in Hong Kong

Hong Kong has emerged as one of the top crypto centers in the world. Its strategic location makes it a hub for international business and finance. Hong Kong's well-established financial infrastructure includes highly developed banking systems. It also has a precise network of service providers.

Also, the country provides an ecosystem of investors that includes angel investors, private equity firms, and venture capitalists.

Crypto businesses can receive access to these advantages in Hong Kong. However, in many cases they might need a license for their crypto-related activity.

In Inteliumlaw we can assist businesses with obtaining of the required crypto licenses, be in compliance with the applicable regulation and enjoy advantages of the jurisdiction elevating their scale.

Understanding The Importance Of A Hong Kong Crypto License

Interested in blockchain technology’s potential, Hong Kong invested $67.2 million to the industry. The investment was made through the ITF (Innovation and Technology Fund) between 2018 and 2021. The country has evolved over the past few years. In 2019 Hong Kong implemented an opt-in licensing regime for businesses conducting virtual assets exchange services.

Until recently, Hong Kong lacked certain cryptocurrency rules that raised concerns. These regulatory gaps were mainly related to market stability and investor protection.

To address those concerns, in 2022 they enhanced crypto regulation to different types of crypto activities including distribution activity, dealing and advisory services in the sphere.

In December 2022 the country implemented mandatory licensing regime for the trading of non-security tokens.

In January 2023 the Hong Kong Monetary Authority informed on the plans to implement mandatory licensing for stablecoins related activities, including wallet services. The regulation is expected to be in force from 2024 or 2025.

Also, further to December 2022 developments in the legislation, in June 2023 Hong Kong's government provided a proper guidance and started to issue the cryptocurrency exchange license that covers non-security tokens trading activity as well. The Security and Futures Commission (SFC) is responsible for granting of this license.

In recent months, it has made a “boom” in the Hong Kong crypto sphere and attracted many investors to Hong Kong’s crypto market, as well as created newer job opportunities.

All the above shows a very crypto friendly approach of Hong Kong government. Thus, obtaining of this license for sure can work in favor of businesses. It provides them access to crucial banking services and allows them to act in compliance with applicable regulation.

In addition, this licensing regime has improved Hong Kong’s crypto industry and the overall economy that indeed will work for the benefits of crypto businesses.

Advantages Of Obtaining A Crypto License In Hong Kong

Running a cryptocurrency business without a license in Hong Kong can lead to regulatory penalties and other legal issues. Obtaining a Hong Kong Crypto license proves your compliance with Hong Kong’s regulatory framework, among other the SFC (Security and Futures Commission) requirements , AML (Anti Money Laundering), and CTF (Counter Terrorism Financing) regulations.

This license offers several advantages to cryptocurrency businesses.

Building Reputation And Credibility

An SFC-provided a Crypto license can help businesses enhance their reputation among partners or customers. It portrays a business as genuine and an entity that follows government regulations. Having a crypto license in Hong Kong helps you build your reputation globally as well.

Gaining The Confidence Of Investors

Hong Kong Crypto license helps businesses to gain the confidence of its institutional investors. It shows your commitment to using a regulated pathway and reduces legal risks.

Expansion In The Market

This license helps businesses expand in the market. It also attracts customers who prioritize security and compliance. It increases a business’s credibility and trustworthiness.

Providing Global Recognition And Reducing Risks

There are international standards set by organizations like FATF (Financial Action Task Force). Having this license improves your global recognition and helps you attract partners worldwide.

Having a HK crypto license can help businesses by reducing risks. Those risks include loss of customer trust, legal and regulatory actions, and reputational damage.

Access To Crucial Banking Services

Hong Kong is a known financial center with a wide range of investors and venture capitalists. Obtaining a crypto license in Hong Kong can provide you access to banking services.

It is a known fact that Hong Kong Monetary Authority requested banks in Hong Kong to consider the crypto market sector and provide banking services to it.

Thus, in Hong Kong crypto business has chances to find banking solutions. This is for sure very big advantage for crypto companies.

Hong Kong Crypto License Types

The Crypto License in Hong Kong has several types. The license categories are established to ensure businesses work within their allowed sectors.

There are three the most popular types of crypto licenses in Hong Kong that could be granted to crypto businesses, namely Type 1, Type 7, and Type 9. You need to meet specific requirements to get one of these licenses from the SFC.

Type 1 Crypto License

With the type 1 Hong Kong Crypto license, a business can deal in securities. This means your company will be permitted to work with the tokens that are qualified as securities. The type 1 crypto license allows businesses to buy, sell/distribute and market security tokens in Hong Kong and target Hong Kong investors. To fall under this license it is enough to have at least one virtual assets that could be considered as a security.

Type 7 Crypto License

This type of Crypto license authorizes your business to provide ATS (Automated Trading Services). The type 7 license allows running automated trading systems. Usually, it is required from a centralized virtual assets trading platforms in addition to Type 1 license it allows you to buy and sell financial products like cryptocurrencies.

Type 9 Crypto License

The type 9 Hong Kong Crypto license allows you to handle asset management including the one related to crypto assets. If the portfolio includes more than 10% of virtual assets this license might be required. One might argue that this license will not be needed if the management performed in relation to crypto assets that are not qualified as securities.

It should be noted that Hong Kong has two crypto licensing regimes available simultaneously. One of them covers platforms that deals with securities and therefore will need to apply for Type 1 and Type 7 licenses. Another one applies to the trading activities with non-security tokens. The latter will need to be licensed by SFC under Part 5B of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

SFC encourages crypto trading platforms applying under both regimes considering the changing qualification of tokens.

Regulatory Framework For Cryptocurrency In Hong Kong

Main regulator of cryptocurrency businesses in Hong Kong is SFC. It establishes regulations, grants licenses, monitor activity of the businesses.

Another authority that is worth to mention is Hong Kong Monetary Authority (HKMA). It develops regulatory approaches to virtual assets related services in Hong Kong and together with SFC issue guidelines for regulated crypto companies.

The regulatory framework for cryptocurrencies in Hong Kong could be described in the following points.

In May 2023 the SFC published a circular with requirements to crypto businesses subject to licensing regime in Hong Kong. The SFC’s guidance includes:

All these documents together with amended legislative act constitute regulatory landscape for VASPs in Hong Kong.

Requirements For Acquiring A Crypto License In Hong Kong

Acquiring a Hong Kong Crypto Exchange license includes several key requirements. These are overseen by the SFC (Securities and Futures Commission). These requirements enable the regulatory body to maintain and ensure business compliance.

Key requirements needed to acquire a cryptocurrency license in Hong Kong.

Formation Of A Business Entity

The first step is to establish a legal business entity like a limited company in Hong Kong. The company should have intention to conduct cryptocurrency-related activities, among other to offer sale-purchase of virtual assets and/or introduce itself as a provider of such offers, advertise virtual assets, to provide regulated functions or make a representation of providing these functions. The company must comply with corporate government requirements.

Operational Infrastructure

Your business must have adequate operational infrastructure. It should support your trading systems, security protocols, and customer management. The infrastructure of your business should be designed to ensure integrity. It should also provide reliability to your licensed operations.

The premises for storage of documents and records in Hong Kong should be approved by the regulator.

Meeting The Proper Criteria

The business and individuals behind it (like directors, officers, and key personnel) should meet the SFC’s fit and proper criteria. These criteria include honesty, integrity, and competence in managing crypto related services. It anticipates clean criminal records, proper source of wealth and reputation, AML/CFT history checking, etc.

The business should provide at least to officials who will be positioned as suitable for virtual services providing and will serve as responsible officers.

Compliance Procedures And Policies

Cryptocurrency businesses must have effective procedures and policies. Those measures are AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing). A business must establish risk-based controls and CDD processes. Transaction Monitoring systems and reporting mechanisms should also be included.

Capital Requirements

Depending on the license type you require, your business must meet the capital requirements set by the SFC. This requirement ensures that you have sufficient finances to support your business operations. To obtain a Hong Kong crypto license, you need to pay $10,000 as the "State fee for application" and keep a "share capital" of $640,000 to $1 Million.

Compliance With Security Laws

This is relevant for businesses offering services related to security tokens. In this case the project should also follow Hong Kong’s securities law and regulations. In addition to license obtaining, this includes disclosure obligations and investor protection.

Requirements For Registering A Cryptocurrency Company

Starting a cryptocurrency business in Hong Kong has a lot of perks. Hong Kong has a business-friendly environment. It provides access to capital and a global reputation. Registering a company in Hong Kong includes a certain number of key requirements. You need to follow some steps and requirements to register your company in the country.

Professional guidance from an expert legal advisor can help you establish your business in the heart of Asia. Unlock your business potential in Hong Kong with Inteliumlaw to ensure growth opportunities for your company.

Hong Kong Cryptocurrency License Obtaining Process

Obtaining a Crypto license in Hong Kong involves several processes. They must be completed precisely. You need to have a budget, decide on your business concept and developed a business plan. Now, you can start the the process with Inteliumlaw.

First of all , we will help you with business establishment and then we can move forward to the licensing stage.

Determining Licensing Requirements

First, you need to meet all the requirements based on specific cryptocurrency-related activities. The requirements might vary depending on your target market, operational model, risk management strategies. You can fall under one of the license types Type 1, Type 7, and Type 9, as described above or under AMLO licensing regime. Communication with the SFC might be vital to determine specific requirements for your model.

Submitting The Application

Application submission includes preparation and sending of a detailed application form with which we can help you. We should also provide supporting documents, including business plans, KYC documents for the engaged persons, and other required information.

Regulatory Review And Assessment

The SFC conducts a thorough review of the license application. This includes an assessment of the applicant’s financial stability, qualification, reputation, expiriance. They also review your compliance capabilities and organizational structure. You have to be prepared to respond to inquiries from the SFC during the review process.

On-Site Inspections

The SFC may conduct an on-site inspection or due diligence checks. This is to ensure that you are obeying the regulations and requirements. They might inspect your risk management systems, permitted activities, and obligations, implemented AML/CFT measures. These inspections are done to check whether you are following the issued guidelines.

Approval Of License

When the reviews and assessments are completed, and all the requirements are satisfied. SFC grants approval and issues the Crypto license. Your license will specify your permitted activities, conditions, and regulatory obligations. You must abide by Hong Kong’s laws and regulations after obtaining the license. It ensures you a smooth business experience.

How Inteliumlaw Can Help You?

Running a cryptocurrency business without a license in Hong Kong can lead to several legal issues. Adding to that, your business’s overall reputation can also be affected. Your growth gets reduced as well. Obtaining a Hong Kong crypto license is a necessary rule. If you want to run your company smoothly and build a global reputation, you need it.

Inteliumlaw helps cryptocurrency businesses set up their companies in Hong Kong and obtain crypto license there, providing a series of services.

Inteliumlaw’s specialists provide professional guidance to businesses. Our experts understand the crypto regulations and requirements in Hong Kong. We can assist you throughout the registration and licensing process and ensure compliance with all legal obligations. Partner with InteliumLaw and secure your Hong Kong crypto license.

FAQ

Is cryptocurrency regulated in Hong Kong?

Yes, the regulation framework includes the Anti-Money Laundering and Counter-Terrorist Financing Act. Also, The Securities and Futures Ordinance (SFO) and other regulations apply to businesses dealing with security tokens, futures.

How much will a crypto license cost in Hong Kong?

You will need a definite amount of $10,000 as a state fee for application for a Hong Kong Crypto license. In addition to that, certain fee for corporate and legal services should be considered, that will make all the processes much easier for you.

Who regulates cryptocurrencies in Hong Kong?

SFC (Securities and Futures Commission) is responsible for regulation of activities related to Cryptocurrencies in Hong Kong. In addition, Hong Kong Monetary Authority (HKMA) provides guidelines for regulated crypto companies.

Do I need a Hong Kong crypto exchange license?

In most cases the Virtual Assets Service Providers (VSAPs) must have a crypto license from SFC. To understand if your business falls under the licensing requirements – proper analysis and respective advice are recommended.

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