HONG KONG SAR, CHINA Law and Practice Contributed by: Pang Lee, Joyce Wang, Mark Liang and Francis Li, Cooley
• utility tokens (assets providing access to specific products or services); • exchange tokens (cryptocurrencies intended pri- marily as mediums of exchange, like Bitcoin); • stablecoins (assets pegged to fiat currencies); and • non-fungible tokens (NFTs) (only those structured as collective investment schemes or with invest- ment features). Crypto-assets are subject to a dual regulatory approach. While they interface with existing regula- tory frameworks – eg, the Securities and Futures Ordi- nance (Chapter 571) (SFO) – when a token qualifies as a security, there are also specific, purpose-built statu- tory frameworks for native crypto-assets. The AMLO establishes a bespoke licensing regime for non-secu- rity VAs. Centralised VATPs must be licensed under both the SFO and the AMLO to ensure comprehensive oversight, regardless of how an asset’s classification may fluidly evolve over time. Additionally, the Stable- coins Ordinance (Chapter 656) provides a dedicated framework exclusively for stablecoin issuers. Regulated activities in crypto-assets encompass operating a centralised trading platform, dealing in VAs, managing VA portfolios, providing VA advisory services, providing VA custody services and issuing an FRS. Prohibited activities include the issuance or public offering of algorithmic stablecoins by unregulated entities. Crucially, the jurisdiction maintains a rigid distinction between retail and professional markets. Licensed VATPs may offer highly liquid, large-market- capitalisation spot assets to retail investors, subject to rigorous suitability assessments. However, complex products and highly leveraged instruments are strict- ly prohibited for retail distribution. Under the paper of policy statement regarding perpetual contracts (Perps) finalised on 11 February 2026, licensed VATPs are permitted to offer VA perpetual contracts, lever- aged derivative instruments without expiry dates, but the offering of these specific products is exclusively restricted to Professional Investors. The regulatory landscape is expanding significantly in the next 12 months. Following joint consultation conclusions by the SFC and the FSTB published in
December 2025, the government is introducing com- prehensive legislation to the Legislative Council to establish new mandatory licensing regimes through amendments to the AMLO. These new regulations will explicitly cover OTC VA dealing services, VA custo- dian services, VA advisory services and VA portfolio management, ensuring the entire digital asset value chain is brought within the formal regulatory perimeter. 2.3 Regulated Firms and Legal Wrappers The regulatory classification of the underlying asset does not change solely because of the utilisation of a legal wrapper, such as an investment fund. The SFC strictly applies the “same business, same risks, same rules” principle. Utilising a fund structure shifts the primary compliance burden from the direct investor to the fund manager and the intermediaries distributing the interests of the fund, but it does not bypass the regulatory perimeter. For regulated firms and investment funds, exposure to crypto-assets triggers significant regulatory impli- cations. Historically, under the SFO, a fund manager (holding a Type 9 Asset Management licence) that intended to invest more than 10% of a portfolio’s gross asset value into VAs was required to uplift its licence to a specialised “Type 9 VA” designation, accompa- nied by bespoke conditions outlined in the “Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets” (October 2023). However, under the proposed 2026 regulatory expan- sions for VA portfolio management, this 10% de minimis threshold for exemption from uplifting one’s Type 9 licence is no longer available. Consequently, if enacted, any intermediary carrying on the business of providing asset management services for a portfolio that invests in VAs, regardless of the size of the alloca- tion, may need to obtain the appropriate VA manage- ment licensing or registration and adhere to rigorous risk management, independent auditing and custodial standards. Intermediaries distributing these VA-wrapped prod- ucts may also need to comply with the SFC’s complex product regime, ensuring appropriate access rights, conducting derivative knowledge assessments and adhering to selling restrictions tailored as to whether
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