In 2022, Hong Kong enacted the Prevention of Money Laundering and Financial Terrorism Act, which boosted investor confidence as the criteria for the crypto sector were clearly outlined.

According to the rules of the law, the Regulator (SFC-Securities and Futures Commission in Xiangyang) divides crypto-assets into:

  • Virtual assets are the cryptocurrencies themselves: Bitcoin and altcoins. They can be exchanged or stored in an electronic wallet.
  • Security Tokens – are equated to securities, the turnover of which occurs on stock markets. They include derivative Bitcoin products and ICO tokens.

In Hong Kong, it is necessary to have a type 1 license (SFC License) if there is a sale or distribution of Security Tokens. The Hong Kong regulator has designated cryptocurrencies as virtual commodities and their exchange does not require a license. However, if virtual currencies are exchanged for fiat currencies, then a Money Service Operator (MSO) license is required.

The government is interested in the development of the crypto industry, issuing Hong Kong crypto exchange license, as it sees the potential in it and a huge contribution to the future of the country’s economy. The territory has a developed network of bitcoin ATMs – 124 ATMs, the country ranks 4th after the U.S. and Singapore in terms of infrastructure readiness to work with virtual currencies.

Advantages of obtaining a cryptocurrency license in Hong Kong

Progressive regulatory environment.
There is a clear indication of what type of activity falls under the issuance of a Hong Kong crypto license and what does not, as well as outlined requirements for companies to legally conduct their business. Obtaining a license is evidence that the company complies with all global standards of the financial industry.

World Financial Hub.
Legal registration of the company and its work in this jurisdiction opens Asian markets for business, the possibility of scaling up, attracting investments from the global crypto community, and establishing cooperation with representatives of different industries.

Tax environment.
No VAT/GST, capital gains tax, or currency controls, all of which contribute to the active development of the virtual asset sphere.

Stable economy.
Hong Kong is in the top three in the rating of “ease of doing business”, many startups, fintech industry incubators, banks, and financial institutions are registered. Several global crypto exchanges operate in the jurisdiction: Binance, Coinbase, Nexo, and Bitfinex

Request more info about the Crypto License in Hong Kong

Requirements to obtain a cryptocurrency license in Hong Kong

As of June 1, 2023, the SFC began issuing licenses for crypto trading platforms, now virtual asset service providers (VASPs) are subject to regulatory review.

Taking the side of investor protection, the SFC imposes several requirements for authorization, including:

  • Registration with the SFC is mandatory. Illegal activities within Hong Kong are punishable by a fine. For activities related to the distribution, sale/purchase of virtual assets, obtaining a cryptocurrency license in Hong Kong is required.
  • Compliance with AML/KYC procedures. The regulator requires the identification of clients and monitoring of transactions for the possibility of money laundering.
  • Technical support for data storage. The company is required to secure customer assets from cyber-attacks. Also, transaction and customer data must be retained for a certain period to allow for auditing at any time.
  • Company structure and financial accounting. The company provides a financial statement and balance sheet regularly, as well as full disclosure of the managers and beneficiaries.
  • Proof of financial solvency. The business must provide convincing evidence to the Regulator that it has sufficient resources to conduct crypto activities.

Procedure for obtaining Cryptocurrency License Registration in Hong Kong

To process Hong Kong crypto licensing, an application is submitted to the SFC. There are several steps in the application and processing procedure:

  • Stage 1

Determine the type of license

Depending on the nature of the business, it may be necessary to apply for one type of license, if the activity will be related to asset management, operation of trading platforms, or investment consulting.

  • Stage 2

Formation of the package of documents

The company must disclose all information about the management and founders, so the general package of documents includes their identification documents, proof of their experience in the field, and confirmation of the absence of criminal records. SFC is very attentive to the reputation of the main managers, checks the information about their professional activities in the past, and also the directors are tested for compliance with their position. It is necessary to prepare a business plan for the company, documents confirming the financial capacity to conduct crypto activities and prepare AML/KYC procedures.

  • Stage 3

Company Registration

The process of registration with the  Registrar of Companies and the Hong Kong Inland Revenue takes about one month, according to the Companies Ordinance.
A company needs to comply with all the requirements of the Regulator in its operations, as this can lead to millions of dollars in fines, license revocation, or imprisonment of up to 10 years for fraud in the crypto market.

  • Stage 4

Apply to the SFC

Before applying for the SFC, the state fee is paid. The review period can take from 3 to 6 months.

  • Stage 5

Approval of the premises by the SFC

In addition to issuing the authorization, SFC must approve the premises where the data, company documents, customers, and their transactions will be stored.

  • Stage 6

Obtaining authorization and complying with regulations from the SFC

Once authorized, the service provider will be required to report changes in the company (change of directors, founders, address) to the Regulator, as well as pay annual fees and submit reports for audit.

Crypto license consultant in Hong Kong


Inhyuk Suh

Setting up a cryptocurrency company in Hong Kong

Most often crypto entrepreneurs choose to register – a company limited by shares (Private Company Limited by Shares).

Requirements from the legislation for registration in the state registry:

  • Provide copies of passports of all directors, and founders with translation into English and be notarized. Also indicate phone numbers, and e-mail and confirm the address of residence.
  • If one of the founders is a legal entity, all documents for the company, including identification documents for the directors and beneficiaries, must be submitted in addition.
  • Requirements for the authorized capital are not specified in the legislation but usually indicate – USD 129.
  • It is obligatory to keep accounting records, documents are kept for at least 7 years, and annual declaration is submitted to the Tax Inspectorate.
  • Number of shareholders: minimum one – maximum 50.
  • Shareholders’ meetings are obligatory, but the place does not matter.
  • Norms for the number of directors: two, can be physical persons can be legal entities, and there are no requirements for residency.
  • It is mandatory to have a secretary (physical person or legal entity) – a resident of Hong Kong.
  • There must be a registered office where all documents (minutes of meetings, registers of shareholders, financial statements) will be kept.
  • AML/KYC policy is a prerequisite for crypto companies.
  • The future crypto service provider must prove its financial solvency before the Regulator.

Stages of starting a crypto company:

  • Stage 1

Planning for future operations

In Hong Kong, there is a clear definition of what type of activity is covered by a license and what is not. Conducting illegal crypto activities can result in fines or imprisonment. Therefore, first of all, it is necessary to decide on the type of services the organization will provide.

  • Stage 2

Choose a business name

The chosen name must be unique, you can check this online through the Hong Kong Registration Chamber.

  • Stage 3

Company Registration

Company registration is the submission of all documents as per the Registrar’s legislation.

These include:

  • Application to the State Registry;
  • Constituent documents (articles of association, information on directors and founders, minutes of appointment of general managers and secretary (Hong Kong resident)
  • Proof of legal local address
  • Stage 4

Bank Account

There are over 160 banks and another 225 deposit-taking financial institutions operating in the country, but they may have special requirements and additional documents for crypto businesses.

  • Stage 5

Obtain a license

For certain activities related to digital assets, it is necessary to obtain a license from the SFC. The Regulator pays special attention to the reputation of the general managers and owners of the company when reviewing the application, they must pass a “compliance check”, which means meeting such regulations:

  • Confirmation of absence of convictions for financial crimes, fraud, terrorism financing.
  • No criminal record for international crimes
  • Absence of bankruptcy status or liquidation procedure.
  • Stage 6

Registration with the tax authorities

In Hong Kong, the Inland Revenue Department (IRD) issues a taxpayer number. Also, in the future, businesses will file their annual tax returns with this government agency.

  • Stage 7

Data protection

The SFC also approves the premises where the records will be stored. The Personal Data Privacy Commissioner (PCPD) verifies the conditions for secure processing and storage of client data.

  • Stage 8

Compliance with AML/KYC procedures

This jurisdiction is very strict in meeting all FATF requirements, with a particular focus on fintech companies and their compliance with all AML/KYC procedures.

Documents required to obtain a cryptocurrency license in Hong Kong

This global financial giant provides an excellent opportunity to: enter the international market; access a developed banking system; and attract investors to companies with a proven track record from the Hong Kong Regulator.

The permit application process begins with the collection of these documents:

  • Constituent documents (protocols, articles of association, Memorandum of Association, agreements registration certificate)
  • Data on the main managers and beneficiaries (passports, criminal record certificates, proof of work experience, as well as their phone numbers and e-mail addresses)
  • Information on hired employees (secretary, AML manager)
  • AML/KYC policies and procedures
  • Confirmation of information on availability of premises (lease, purchase/sale agreement) and application to SFC for its establishment for storage of documents.
  • Letter of authorization from board of directors to apply.

Types of cryptocurrency licenses

With the development of the cryptosphere, the governments of many countries have been faced with the issue of controlling the fintech industry. In Hong Kong, a license is issued by the Chief Regulator SFC for certain types of business related to virtual currencies. The successful conduct of licensed activities in this jurisdiction means strict compliance with all legal regulations, AML procedures, and audits of the financial activities of companies.

The main types of licenses in Hong Kong:

  • Type 1 license – must be issued if the activity will be related to securities trading, Security Token.
  • License type 9 – is issued for asset management, investment portfolios, and investments in virtual assets.
  • Type 4 license – required for consulting

Companies are required to apply for a permit if their type of business is related to:

1. Fund management

Companies offering fund management services that invest in virtual currencies are required to obtain a type 9 forex broker license.

2. Trading platforms

Cryptocurrency trading platforms that provide an opportunity to buy/sell cryptocurrency products – Security Tokens, which are equated to securities, or on the platform there is an exchange between digital currencies and fiat currencies that receives a license type 1.

3. Distribution of funds

Organizations that offer the sale to investors of investment products related to cryptocurrencies execute a Type 9 license.

4. Advisory services

Companies providing advisory services, and developing strategies for investing in cryptocurrencies must obtain a Type 4 (advisory services) or Type 9 (asset management) license.

Regulation of cryptocurrencies in Hong Kong

The Securities and Futures Commission of Hong Kong (SFC) acts as the main Regulator in Hong Kong. It is the SFC that oversees the compliance of crypto market players. Hong Kong has earned the reputation of a global financial hub, and to maintain its status, the entire legal framework is adapted to the recommendations of the FATF and the norms of other international financial organizations.

Cryptocurrencies are regulated here under the Securities and Futures Ordinance (SFO) and the Anti-Money Laundering and Countering the Financing of Terrorism Ordinance (AMLO).

The SFC stands up for consumer protection and requires financial service providers to strictly comply with AML and KYC procedures based on the Prevention of Money Laundering and Financial Terrorism Act.

Regarding ICOs, the SFC has published its guidelines stating that if the tokens are considered securities, then the activity is licensed. In 2019, the Securities and Futures Commission (SFC) issued guidance on the offering of securities tokens (STOs).
In 2018, the government approved blockchain technology, and in 2023, the Hong Kong Monetary Authority (HKMA) launched e-HKD to explore digital currencies.

The Hong Kong government is working hard to study digital currencies and develop a legislative system that meets all international requirements.

SFC license for cryptocurrencies in Hong Kong

A license from the SFC is the right to legally conduct business in digital currencies in the territory of the key financial center.

The Hong Kong government has invested heavily in researching blockchain technology, and virtual currencies and adapting the regulatory framework to meet the challenges of today’s financial markets.

Algorithm for obtaining a license from the SFC:

  • Consultation with the Regulator about the type of license to be obtained for the company
  • Collection of documents, registration of the application with the Regulator, preparation of AML/KYC procedures
  • Analysis and verification of SFC documents, additional information, and data may need to be submitted
  • Obtaining a license from the SFC entitles you to operate legally in that jurisdiction.

Advantages of obtaining an SFC license:

  • Regulated Environment. The SFC has developed clear AML/KYC regulatory rules for digital currency-related activities.
  • Reputation in the global market. SFC protects the rights of clients and requires compliance with all international regulations, so official authorization from the Regulator is a confirmation of business transparency.
  • Entry into global markets. Developed infrastructure, advanced IT technologies, presence of global financial giants make this jurisdiction very attractive for doing business.
  • Scaling of business. Legalization of activities attracts the attention of investors because the company has already been checked by the Regulator and it means safety for investing money.

A license from the SFC indicates that the business meets all standards, and plans to conduct legal business in the international arena.

Taxation in Hong Kong

If a company registers in Hong Kong but does not have a bank account in this jurisdiction, and does not conduct business with counterparties of this country, then it is exempt from taxes and from obtaining a license.

Tax rates:

  • Profit tax up to $250 thousand -8.25%, over -16.5% (profit received in Hong Kong is taxed)
  • VAT 0%
  • Property tax 15% (purchase/sale)
  • Dividends are not taxed

Taxation of cryptocurrency transactions:

  • Profits earned from trading virtual currencies are subject to income tax
  • Mining will be taxed if it equates to profits from operations
  • ICO is treated as income to the company and taxed

FAQ about cryptocurrency license in Hong Kong

How to get a cryptocurrency license in Hong Kong?

It is possible to legalize activities related to the use of virtual currencies only by obtaining a license from the SFC.

How much does it cost to get a cryptocurrency license in Hong Kong?

The cost depends on the type of activity, payment of state duty for registration of the company, and registration of a bank account.

Who needs to get a cryptocurrency license in Hong Kong?

When applying for a license, it is necessary to get advice from the SFC about the type of license and the types of activities that can be carried out with it.

How long does it take to obtain a cryptocurrency license in Hong Kong?

The SFC can analyze the submitted documents for about 6 months.

Can foreign companies apply for a cryptocurrency license in Hong Kong?

Yes, there is no restriction in the legislation.

Can a cryptocurrency license in Hong Kong be revoked?

Yes, if found to violate legal requirements, or engaging in fraudulent activities, this may result in fines or license revocation.

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