Understanding the Hong Kong VASP License Framework
Hong Kong's Virtual Asset Service Provider (VASP) license regulates businesses operating as virtual asset service providers in the cryptocurrency sector. This includes:
- Cryptocurrency exchanges
- Digital wallet providers
- Token issuance platforms
- Other virtual asset-related service providers
Key regulation update: The Hong Kong Legislative Council passed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance on December 7, 2022, establishing the new VASP licensing regime effective June 1, 2023.
The Regulatory Transition Period
Hong Kong authorities implemented:
- 12-month grace period for license applications
- New compliance requirements replacing previous Securities and Futures Ordinance provisions
- Clear transition arrangements for existing operators
Virtual Assets: Definition and Scope
According to the 2022 amended ordinance (Section 53ZRA), virtual assets are defined as:
| Characteristic | Description |
|---|---|
| Format | Cryptographically secured digital representation of value |
| Functionality | Serves as:
|
| Transferability | Electronically transferable/storable |
| Governance | May include voting rights for asset management |
Additional features may be specified by the Securities and Futures Commission (SFC) through gazette notices.
VASP License Application Requirements
1. Business Entity Requirements
- Must be a Hong Kong registered company or
- Overseas company registered under Hong Kong's Companies Ordinance (Chapter 622)
- Requires fixed physical business address in Hong Kong
2. Personnel Requirements
Minimum 2 Responsible Officers (ROs) required:
- At least one must be an executive director
- If multiple executive directors, all must be appointed as ROs
- At least one RO must reside in Hong Kong
- Continuous business supervision capability
3. Licensing for Representatives
- All individuals providing VA services must obtain SFC approval
- Includes Responsible Officers and licensed representatives
4. Record-Keeping Facilities
- SFC-approved premises for AML/CTF records
- Must be non-residential and suitable for document storage
Application Process Considerations
Current status (as of regulatory transition):
- Specific documentation requirements pending final legislation
Rejected applicants must wind down operations within:
- 3 months of rejection notice or
- Before 12-month grace period ends (whichever later)
FAQ: Hong Kong VASP License
What services require a VASP license?
All centralized virtual asset exchanges operating in Hong Kong or targeting Hong Kong investors require licensing, regardless of whether they handle security tokens.
How does VASP differ from previous regulations?
The VASP framework replaces the Securities and Futures Ordinance requirements for:
- Type 1 license (securities trading)
- Type 7 license (automated trading services)
Who qualifies as a virtual asset service provider?
Any business offering:
- Virtual asset exchange services
- Digital wallet management
- Token issuance platforms
- Other VA-related financial services
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What happens during the transition period?
Existing operators have until June 1, 2024 to:
- Submit complete license applications
- Align operations with new requirements
- Implement compliant record-keeping systems
Are there any exemptions to the VASP requirements?
The ordinance currently provides no exemptions for virtual asset service providers operating in Hong Kong's jurisdiction.