Fintech 2026

HONG KONG SAR, CHINA Trends and Developments Contributed by: Sam Wu and Beverly Fu, YYC Legal LLP

A Turning Point for Digital Finance: Hong Kong’s Regulatory Framework for Virtual Assets and RWA Tokenisation Introduction and overview Hong Kong is solidifying its position as a premier global fintech hub, strategically evolving into an era of sophisticated, regulated growth. Key trends driving this evolution are the implementation of comprehen - sive regulatory frameworks for virtual assets and sta - blecoins, alongside pioneering initiatives in the tokeni - sation of real-world assets. These developments collectively signal a mature market shift, integrating digital finance with the traditional economy under the overarching principle of “same activity, same risks, same regulation”. Licensing regimes for virtual asset (VA) custodian, dealing, advisory and management services Hong Kong is moving from piecemeal VA rules to a full value-chain regime in 2026, with new licences for VA custodian and dealing services and proposed regimes for VA advisory and management services under the Anti-Money Laundering and Counter Terrorist Financ - ing Ordinance (Cap. 615 of the Laws of Hong Kong) (AMLO). These developments will reshape fintech and the broader VA ecosystem, bringing VA service provid - ers much closer to the regulatory model that applies to traditional securities and funds in Hong Kong. Since June 2023, Hong Kong has required virtual asset trading platforms (VATPs) that serve Hong Kong investors or actively market into Hong Kong to be licensed by the Securities and Futures Commission (SFC). In December 2025, the Financial Services and the Treasury Bureau (FSTB) and the SFC published consultation conclusions on legislative proposals for a standalone VA custodian service provider licence, alongside conclusions on a new regime for VA dealing services. In the same VA dealing paper, they launched a further consultation on licensing VA advisory service providers and VA management service providers, with all four regimes to be implemented through amend - ments to the AMLO and a bill targeted for introduction into the Legislative Council in 2026. VA custodian licence – focusing on key risk The proposed VA custodian licence under the AMLO targets entities that safekeep “any instrument enabling

the transfer of VAs” for clients, with a clear focus on control over private keys or equivalent mechanisms. Respondents generally agreed that such entities pose the core risks in VA custody, including cyber risk, key compromise and technology failures that can lead to loss or unauthorised transfer of client assets. Importantly, the conclusion paper clarifies that top- level trustees or fund managers that delegate safe - keeping to a third-party custodian will not generally be treated as VA custodians, reflecting an intention to regulate the entity that actually controls the keys rather than those with purely administrative or over - sight roles. The SFC emphasises a technology neutral approach, so models using multi-party computation (MPC), hardware security modules or smart contracts can still fall within scope where they enable unilateral transfer of client VAs. Under the revised proposals, a licence or registration will be required where an entity can unilaterally trans - fer client VAs, whereas an MPC provider that enables clients to reconstruct keys and move assets inde - pendently may fall outside the regime. Custodians of tokenised securities alone are out of scope, because “virtual assets” under the AMLO expressly exclude securities and futures contracts. The SFC also addresses the common group custody model in which one group entity is the licensed cus - todian, but overseas affiliates support key manage - ment or signing. The conclusion paper indicates that only the entity bearing responsibility for safeguarding client VAs needs the VA custodian licence, provid - ed it retains unilateral control over client assets and group entities do not hold themselves out to Hong Kong investors as VA custodians. However, individu - als within group entities who are materially involved in key management, transaction signing or other core custody functions are expected to be licensed or engaged as “relevant individuals” and accredited to the licensed VA custodian. Financially, licensed VA custodian service providers (other than banks and certain payment institutions already subject to the Hong Kong Monetary Authority (HKMA)’s oversight) will be subject to baseline require - ments aligned with Type 13 “depositary services”

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