The Cascade 101 Guide To Proposed Hong Kong Virtual Asset Dealer Regime

Summary of the proposed regulatory framework and key requirements for Virtual Asset (“VA”) Dealing Provider.

New regulatory framework was proposed in the Public Consultation issued on 27 June 2025 by Hong Kong's Financial Services and the Treasury Bureau (FSTB) and Securities and Futures Commission (SFC). 

Scope of Regulations

Any person, by way of business, making or offering to make an agreement with another person, or inducing or attempting to induce another person to enter into or to offer to enter into an agreement in respect of the following would require a licence granted by or registration with the SFC:

a) for or with a view to acquiring, disposing of, subscribing for or underwriting VAs; or

b) the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of VAs or by reference to fluctuations in the value of VAs. 

Activities Covered

• Simple dealing services, including typically smaller scale VA-VA and VA-fiat (and vice versa) conversions;

• More complex dealing services such as brokerage activities, block trading activities and other relevant activities of advisors or asset managers; and

• Irrespective of whether the services are to be provided through a physical outlet and/or other platforms. 

Requirements

1. Legal Entity Status

   Must be a HK-incorporated company with a permanent place of business in Hong Kong or a company incorporated elsewhere but registered in Hong Kong under the Companies Ordinance Cap. 622.

2. Fit-and-Proper Assessment [1]

   Applied to applicants and relevant persons including substantial shareholders and individuals carrying out VA dealing functions for the corporate entity. 

3. Responsible Officers (ROs)

   Minimum two ROs; all executive directors must be made ROs upon approval by the SFC.

4. Capital Requirements

   Minimum HK$5M paid-up capital + up to HK$3M liquid capital + excess liquid capital equivalent to at least 12 months of its actual operating expenses.

5. Knowledge and Experience

   Must have proper corporate governance structure staffed by personnel with the necessary knowledge and experience.

6. AML/CFT Compliance

   Observe the AML/CFT requirements stipulated in Schedule 2 to the AMLO relating to Client Due Diligence and record-keeping.

7. Governance & Risk Management

   Risk management policies and procedures for managing ML/TF and other risks such as additional risks associated with acquiring VAs for clients via non-SFC-regulated entities, including counterparty-related or AML-related risks and custody risks.

8. Financial Reporting and Disclosure

   Observe prescribed auditing and disclosure requirements and submit audited accounts. 

9. Conduct of Business

   Act honestly, fairly, with due skill, care and diligence, in the best interests of its clients and the integrity of the market, as well as comply with all statutory and regulatory requirements applicable to the conduct of its business activities. 

10. Information and Notifications

    Submit a wide range of information [2] and ensure that the submitted information remains up-to-date. 

11. Record Keeping

    Maintain proper records in relation to its business activities, which will be accessible by Hong Kong regulators. 

12. Protection of Client Assets Implement measures such as proper segregation of client assets and may include safekeeping client assets with licensed or registered VA custodian [3] in Hong Kong. 

13. Investor Protection

    Enhance investor protection through measures such as assessing clients’ VA knowledge, providing clients with adequate training, conducting client risk assessments and risk profiling, setting client exposure limits, to ensure clients’ suitability and to prevent, avoid and disclose actual or potential conflicts of interest.

    Footnotes:

    1. SFC will be conducting a separate consultation exercise on a range of regulatory requirements.

    2. For example, the details in respect of wallet addresses used in their course of business, the scope and nature of the business carried on or to be carried on, and the types of services provided or to be provided.

    3. Please refer to public consultation on the proposed regulatory regime for VA custodian service providers issued on 27 June 2025.

       https://apps.sfc.hk/edistributionWeb/api/consultation/openFile?lang=EN&refNo=25CP7. Cascade Capital's summary of this public consultation can be found here: https://cascadecapitalhk.com/the-cascade-101-guide-to-proposed-hong-kong-virtual-asset-custodian-regime. 

For more information, please contact team@cascadecapitalhk.com.

Disclaimer: This publication provides information on and material containing matters of interest produced by Cascade Capital Limited. The material in this publication is provided only for your information and does not constitute legal or other advice on any specific matter. Readers should seek specific advice as appropriate before acting on the information contained in this publication.