HONG KONG SAR, CHINA Law and Practice Contributed by: Pang Lee, Joyce Wang, Mark Liang and Francis Li, Cooley
alties of HKD10 million and ten years’ imprisonment under the AMLO. Notable enforcement actions underscore this posture. The SFC has consistently issued public warnings and initiated investigations against major unlicensed enti- ties, resulting in criminal referrals to the Hong Kong Police Force. In the high-profile JPEX cryptocurrency exchange fraud case, where losses exceeded USD200 million, authorities arrested numerous influencers and operators on charges of conspiracy to defraud; crimi- nal proceedings have advanced into 2026. The Market Misconduct Tribunal also actively pursues disquali- fication and compensation orders against directors failing to maintain internal controls or co-operate with investigations, including the recent life bans and finan- cial penalties against individuals for insider dealing and false trading. Regulators pursue cross-border breaches with equal vigour. The SFC routinely co-ordinates with overseas regulators and has demonstrated its capacity to obtain worldwide freezing orders and injunctions to secure assets belonging to suspected market manipulators domiciled offshore. The attitude of regulators is expected to remain bifur- cated over the next 12 months. While enforcement against unlicensed, fraudulent or non-compliant actors are expected to only intensify, regulators are simultaneously rewarding fully compliant, licensed firms with unprecedented market access. The recent approvals allowing licensed platforms to offer lever- aged derivatives, engage affiliated market makers and tap into shared global liquidity pools demonstrate a strategic shift towards fostering a highly competitive, yet strictly supervised, ecosystem. 3. Licensing and Set-Up Requirements 3.1 Licensing Requirements The primary trigger for requiring a licence to operate a blockchain or crypto-asset business in Hong Kong is “carrying on a business” in a “regulated activity” or “actively marketing” such services to the public in Hong Kong (governed by Section 115 of the SFO and Section 53ZRB of the AMLO). Currently, operating a
VATP or issuing an FRS can trigger mandatory licens- ing. The expansive 2026 proposed amendments to the AMLO introduce new triggers covering any person who, in the course of business: • provides OTC VA dealing; • safekeeps private keys (VA custody); • provides advice regarding the acquisition or dis- posal of VAs (VA advisory); or • exercises discretionary power to manage VA port- folios. A draft bill to implement these changes under the AMLO is expected to be introduced to the Legislative Council at a later stage in 2026. There are strict territorial limits. A licence obtained from the SFC or the HKMA grants the right to oper- ate only within Hong Kong. However, the regulatory perimeter has significant extraterritorial reach. An entity located entirely outside of Hong Kong is never- theless required to obtain a local licence if it “actively markets” its VA services to the Hong Kong public, or if it issues a stablecoin that references the Hong Kong dollar, regardless of where the entity is domiciled. When new licensing requirements are introduced, regulators typically implement grandfathering or transitional provisions to prevent market disruption for established players. For example, under the Sta- blecoins Ordinance, pre-existing issuers were granted a transitional period allowing continued operations provided they submitted a complete licence applica- tion to the HKMA by a specified deadline. Similarly, the incoming 2026 AMLO amendments are expected to offer expedited approval processes for existing regulated intermediaries, and for banks already pro- viding dealing and custody services under existing SFC/HKMA guidance. However, the proposals for VA advisory and management notably lack broad tran- sitional arrangements, requiring market participants to engage early with the SFC to ensure continuous compliance. 3.2 Set-Up Requirements Obtaining a licence in Hong Kong requires navigating a rigorous, multi-layered application process designed to ensure institutional-grade operational resilience.
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