Crypto Assets

Hong Kong: Guidance on Virtual Asset-related activities for Intermediaries

Latest Developments

On 20 October 2023, the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) issued a joint circular on the virtual asset-related activities of intermediaries (i.e. SFC-licensed corporations or registered institutions that may conduct regulated activities) (Joint Circular). This supersedes the previous joint circular dated 28 January 2022 on the same matter.

This policy update, driven by the rapid expansion of the virtual asset landscape into mainstream finance, responds to the industry's increased interest in expanding retail access through intermediaries, as well as in allowing investors to directly deposit and withdraw virtual assets to and from intermediaries with appropriate safeguards.

Notably, the SFC has allowed SFC-licensed virtual asset trading platforms (VATPs) to serve retail investors and has authorised virtual asset futures exchange-traded funds for public offering in Hong Kong.


The Joint Circular provides updated guidance to SFC-licensed or registered intermediaries which are currently engaged or which intend to engage in activities relating to virtual assets (VA), which may include utility tokens, security- or asset- backed tokens, stablecoins and other crypto assets), including various new requirements to be complied with and best practices. The Joint Circular mainly covers the following activities relating to virtual asset-related products (VA-related products) and services:

  • Distribution of VA-related products;
  • Provision of virtual asset dealing services (VA dealing services);
  • Provision of asset management services in respect of virtual assets (VA asset management services); and
  • Provision of virtual asset advisory services (VA advisory services).

“VA-related products” is defined to mean products which:

  • Have a principal investment objective or strategy to invest in virtual assets;
  • Derive their value principally from the value and characteristics of virtual assets; or
  • Track or replicate the investment results or returns which closely match or correspond to virtual assets.

The key requirements set out in the Joint Circular are summarised as follows:

(i) Distribution of VA-related products

The following requirements are applicable to the distribution of VA-related products:

Requirements Explanation
Requirements on complex product VA-related products are highly likely considered as complex products and will be subject to requirements relating to distribution (e.g. ensuring suitability, minimum information and warning statements).
“Professional investors” only Except for a limited suite of products (e.g. VA-related derivative products that are traded on regulated exchanges specified by the SFC, or exchange-traded VA derivative funds that are authorised or approved for offering to retail investors by the respective regulator in a designated jurisdiction), VA-related products as complex products should only be offered to professional investors.
Virtual asset - knowledge test

Except for institutional professional investors and qualified corporate professional investors, intermediaries should

  1. Assess whether clients have knowledge of investing in VAs or VA-related products prior to effecting a transaction in VA-related products on their behalf; and
  2. Ensure that their clients have sufficient net worth to be able to assume the risks and bear the potential losses of trading VA-related products.

Non-exhaustive criteria for assessing whether a client can be regarded as having knowledge of VAs has been set out by SFC.

Financial accommodation

When providing any financial accommodation for investing in VA-related products to clients, an intermediary should be cautious and should assure itself the client has the financial capacity to meet the obligations arising from leveraged or margin trading in VA- related products, including in a worst-case scenario. In the absence of such assurance, the intermediary should not accept instructions from the client.
Provision of information and warning statements  Except for institutional professional investors and qualified corporate professional investors, intermediaries should provide information and warning statements relating to VA-related products and the underlying VA investments in a clear and easily comprehensible manner to clients.
Provision of risk disclosure statements Except for institutional professional investors and qualified corporate professional investors, intermediaries should provide risk disclosure statements (which can be a one-off disclosure) to clients specific to VAs. The risk disclosure statements should include, amongst other things, and where applicable, the general risks of trading in futures contracts, risks specific to VA futures contracts, the continuing evolution of VAs and how this may be affected by global regulatory developments, price volatility, and other applicable risks.


(ii) Provision of VA dealing services

Intermediaries providing VA dealing services are also required to comply with the following requirements:

Requirements Explanation
Professional investors only

VA dealing services should only be provided to professional investors.

SFC and HKMA requirements Intermediaries are expected to comply with all the regulatory requirements imposed by the SFC and the HKMA when providing VA dealing services, regardless of whether the VAs involved are securities.

Partner with SFC-licensed VA trading platform 

To provide adequate investor protection, intermediaries are only allowed to partner with SFC-licensed VATPs.
Existing type 1 clients only Currently, only intermediaries licensed or registered for Type 1 (dealing in securities) regulated services are allowed to provide VA dealing services. Additionally, such services should only be provided to the intermediaries’ existing clients to which they provide services in Type 1 regulated activity.

Licensing / registration requirements and Terms and Conditions

(Restrictions on acting as introducing agents)

(Receipt and withdrawal of VAs)

The SFC (in consultation with the HKMA, where applicable) will impose as licensing or registration conditions the expected conduct requirements for intermediaries’ provision of VA dealing services under an omnibus account arrangement.

For example, one licensing and registration condition is where Type 1 intermediaries providing VA dealing services as an introducing agent, they should not relay any orders on behalf of their clients to SFC-licensed platforms or hold any client assets (including fiat currencies and client VAs) for the introducing services.

Another licensing or registration condition requires intermediaries to comply with the prescribed terms and conditions (Terms and Conditions).

The standards set out in the Terms and Conditions relate to the performance of the dealing function carried out by intermediaries, including the safeguarding requirement that intermediaries which allow clients to deposit or withdraw VAs from their accounts, should only receive or withdraw such client VAs through the segregated accounts established and maintained with either their partnered SFC-licensed platforms or authorised financial institutions which meet the expected standards of VA custody (issued by the HKMA from time to time).

Terms and Conditions for Retail Clients
The Terms and Conditions specify safeguards for intermediaries providing VA dealing services to retail clients in particular, including: i) assessing their knowledge of VAs and risk tolerance level, ii) setting a limit to ensure reasonable exposure to VAs with reference to their financial situation, iii) ensuring that VA dealing activities are conducted through an omnibus account established with an SFC-licensed platform that is not subject to the licensing condition that it can only serve professional investors, and iv) implementing adequate controls to ensure they can only trade in VAs that are made available for trading by retail investors.
ALMO Requirements Intermediaries should also comply with the requirements under Chapter 12 of the Guideline on Anti-Money Laundering and Counter Financing of Terrorism (For Licensed Corporations and SFC-licensed VATPs), which sets out the relevant statutory and regulatory requirements in line with international standards of anti-money laundering and counter-financing of terrorism (AML/CFT), as well as the AML/CFT standards which licensed corporations and VA service providers licensed by the SFC in order to comply with the statutory requirements under the AMLO.


(iii) Provision of VA asset management services

Intermediaries providing asset management services in respect of VAs are also required to comply with the following requirements:

Requirements Explanation
Proforma terms and conditions apply on meeting the de minimis threshold
In respect of VA portfolio managers and VA discretionary account management services, if an intermediary intends to invest 10% or more of the gross asset value of a portfolio in VAs, or where the stated investment objective of a portfolio is to invest in VA (de minimis threshold), additional requirements will apply as set out in the Proforma terms and conditions for licensed corporations or registered institutions which manage portfolios that invest in virtual assets published in October 2023, which will be imposed as licensing or registration conditions.
10% gross asset value limitation for discretionary account management services
For discretionary account management services, where a Type 1 intermediary is authorised by its clients to provide VA dealing services on a discretionary basis as an ancillary service, the intermediary should only invest less than 10% of the gross asset value of the client’s portfolio in VAs.
Existing requirements governing asset management apply
Intermediaries providing advisory services in tokenised securities should comply with the existing requirements governing asset management and the expected standards of conduct and guidance on tokenised securities issued by the SFC from time to time.


(iv) Provision of VA advisory services

Requirements Explanation
SFC and HKMA requirements

Intermediaries are expected to comply with all the regulatory requirements imposed by the SFC and the HKMA when providing advisory services irrespective of the nature of the VAs (e.g. whether or not the VAs involved are securities).

Existing Type 1 and 4 clients only

VA advisory services should only be provided to intermediaries’ existing clients to which they provide Type 1 or Type 4 (advising on securities) regulated activity.

Expected conduct requirements

The expected conduct requirements for intermediaries providing VA advisory services are set out in the prescribed Terms and Conditions, including suitability obligations.

For clients who are not institutional or qualified corporate professional investors, the intermediary must assess the client’s knowledge of VAs and their risk tolerance level before providing any services. If a client lacks such knowledge, intermediaries can only provide services if they have provided adequate training to the client.

Suitability for retail clients
Intermediaries must ensure any VA recommended to retail clients is of high liquidity and is made available by SFC-licensed platforms for trading by retail investors.
Existing requirements on advising on securities apply
Intermediaries providing advisory services in tokenised securities should comply with existing requirements governing advising on securities and the expected standards of conduct and guidance on tokenised securities issued by the SFC from time to time.


How could it be relevant for you?

Given the implementation timeframe set out above, both intermediaries which currently engage in VA- related activities and those which intend to engage in VA-related activities should immediately assess the relevant VA-related products and services to meet the relevant requirements which will apply pursuant to the Joint Circular. Intermediaries should also ensure that the above-mentioned requirements are properly complied with before the transition period expires.

Next Steps

The Joint Circular will be effective immediately for intermediaries which do not currently engage in VA- related activities. For intermediaries which are serving existing clients of VA-related activities, there will be a three-month transition period before the full implementation of the expected requirements of the Joint Circular. The SFC and the HKMA should be notified in advance if intermediaries tend to engage in activities involving tokenised securities and VAs, or if any changes to these conducted activities are anticipated. 

*Information is accurate up to 27 November 2023

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