Crypto License Hong Kong: Regulations and Compliance Essentials 

• In the current scenario, Hong Kong has emerged as a leader in the field of cryptocurrency. The Hong Kong government through the medium of Securities and Futures Commission is moulding the regulatory framework for the crypto industry. This change in the business landscape has provided both challenges and opportunities for investors and financial organizations. To navigate the complex regulatory landscape of Hong Kong, it is essential to secure a Hong Kong crypto license. The first step of this process is to register a company in Hong Kong.  Hong Kong cryptocurrency license is necessary for businesses wanting to legally operate in this dynamic market. The following blog discusses the regulations and compliance you need to follow for a crypto license in Hong Kong.  

Crypto License in Hong Kong  

• Hong Kong has created a regulatory framework for all cryptocurrency activities balancing innovation along with consumer protection. The key regulatory bodies in Hong Kong that are overseeing the crypto framework are the Securities and Futures Commission (SFC) as well as Hong Kong Monetary Authority (HKMA). Furthermore, the Virtual Asset Service Provider (VASP) regime provides a regulatory framework to oversee the entities engaged in virtual assets activities such as cryptocurrencies.  

Who Requires a Crypto License in Hong Kong 

The businesses that require a crypto exchange license in Hong Kong are: 

• Virtual Asset Service Providers (VASPs) 

• Any type of business providing services consisting of virtual assets, like: 

• Companies facilitating the exchange of virtual assets  

• Customer services for digital assets  

• Companies offering wallet services for holding crypto assets 

• Cryptocurrency exchanges that are trading platforms 

• Entities engaging in regulated activities: 

• Companies providing exchange services for cryptocurrencies.  

• Offering asset management services that are related to the virtual assets.  

Main Legal Requirements 

• In order to operate legally as a VASP in Hong Kong, applicants should follow the regulatory requirements set up by the Securities and Futures Commission (SFC). These requirements originate from the amendments made to Anti Money Laundering (AML) and Counter-Terrorist Financing Ordinance. Here are some of the major requirements for a crypto license in Hong Kong: 

Human resource requirements 

• At least two directors should be appointed and one of the directors should be a resident of Hong Kong. The company should have a minimum of two licensed representatives, one of who should be an executive director.  

Registration of Company  

• The applicant should establish a limited liability company in Hong Kong with a permanent physical office.  

Compliance policies 

• A company should apply AML and CFT measures and also provide detailed protocols related to risk management, business continuity plans, along with cybersecurity measures. 

Capital requirements  

• Companies should have a minimum share capital of 5,00,000 HKD which is approximately (650,000 USD) at all times.  

Business plan 

• Companies should provide a well-detailed business plan highlighting the operation strategies they are going to follow along with the financial projections for the next 5 years.  

The licensing procedure  

• The procedure to acquire a cryptocurrency license in Hong Kong consists of multiple steps that ensure adherence to the regulations that are set by SFC.  

Consultation with SFC 

• Take part in the preliminary consultations with the SFC in order to discuss the business model of your company under specific licensing regulations. This step is necessary for clarifying any expectations and addressing any regulatory issues since the start.  

Register the company  

• The applicant should register for a limited liability company in Hong Kong consisting of a unique company name, fill out incorporation documents and appoint at least two directors.  

Prepare necessary documents  

• Applicant should compile all the necessary documents such as Valid IDs of the directors and shareholders, proof of the paid-up capital, a chart detailing management structure, a business plan with all the services and market strategy, and internal policies for the AML/CFT compliance.  

Appointing responsible officers 

• The company should have two licensed representatives and responsible officers whose job is the see compliance as well as risk management. Also, provide information regarding their qualifications and experience.  

Submit the Application  

• Once all the necessary documents and have overviewed all the compliance protocols, then submit the application via SFC’s WINGS platform and pay the application fees.  

Review of application  

• The SFC is now going to evaluate your application based on its criteria. Remember, that they may ask for additional information for clarification, and compliance checks to evaluate the validity of the information provided.  

Check all the protocols  

• The SFC may conduct regular checkups to make sure that proper risk management systems are incorporated and that there are effective security protocols that follow the rules and regulations.  

Final approval  

• If your application meets all the necessary requirements and passes the evaluation, SFC is going to issue a crypto license, enabling the company to operate legally in Hong Kong.  

Compliance Obligations  

• After a VASP gets a cryptocurrency license in Hong Kong, it should follow multiple ongoing compliance regulations in order to sustain its operations. These obligations are: 

AML and CFT compliance  

• VASPs are required to incorporate a robust security system for KYC, keeping an eye on transactions, and reporting any suspicious activities. The company should maintain a detailed record of consumer recognition, transactional details, and regular reports provided to the authorities regarding any suspicious transactions.  

Risk management  

• Conduct regular risk evaluations to recognize weaknesses in operations such as money laundering or terrorist financing. The company should have strong internal controls aligned with the best practices of risk management.  

Financial resource requirements  

• The company should have sufficient financial resources stated by SFC in order to ensure any operation risks and continue ongoing business activities. As a part of the ongoing compliance measure, companies should provide financial statements to the SFC.  

Regular audits  

• The company should conduct regular internal audits in order to evaluate compliance with the regular requirements and also prepare for potential inspections which can be done by the SFC to ensure adherence to the licensing conditions. 

Licensing conditions 

• In some cases, the SFC may impose particular conditions on a granted license and it is the duty of VASPs to follow these conditions religiously. Most of the time these conditions are related to operational practices and risk management.  

Conclusion  

• Acquiring a crypto license in Hong Kong is necessary for companies wanting to establish their foothold in the crypto market of the region. By following the regulatory requirements and compliance measures set up by the SFC business can create a strong foundation in the crypto market of Hong Kong. For personalized guidance regarding the licensing process, contact experts at Tetra Consultants who will simplify your business journey with their expert guidance and specialized industrial knowledge.  

• Contact Us for more assistance in understanding the regulations and compliance of crypto license in Hong Kong.