FSTB and SFC conclude consultations on virtual asset dealer and custodian regimes, further consult on two new regimes
Executive Summary
The Financial Services and the Treasury Bureau (FSTB) and Securities and Futures Commission (SFC) have concluded consultations launched on 27 June 2025 on licensing regimes for virtual asset (VA) dealers and VA custodians, confirming legislative proposals to regulate these activities while further consulting on new regimes for VA advisers and asset managers. This advances Hong Kong's comprehensive VA regulatory roadmap, mandating SFC licensing for core VA dealing (e.g., VA-to-VA conversions, broker-dealer services) and custody (focusing on private key safekeeping), with strict requirements for asset segregation and use of licensed custodians to mitigate risks like insolvency, fraud, and cyberattacks. It matters for compliance professionals as it closes gaps in VA oversight, enforces Type 1/Type 13-equivalent standards, and signals accelerated implementation in 2026, potentially reshaping market structures for trading, custody, and related services. #
What Changed
- - VA Dealer Regime: Introduces licensing for VA dealing activities (e.g., VA conversions, broker-dealer services at physical outlets or otherwise), excluding tokenized securities/derivatives (regulated under existing regimes) and HK-licensed stableco
- VA Custodian Regime: Targets entities safeguarding private keys or enabling unilateral VA transfers (e.g., capturing staking providers but exempting non-custodial wallets or delegating top-layer trustees/fund managers); requires responsible officers/
- Exemptions Under Consideration: Aligns partially with Type 1 exemptions, including principal/intra-group transactions, VA use as payment for goods/services, chaperone via SFC-regulated dealers, VA rewards distribution (via licensed channels or to pro
- Further Consultations: New regimes for VA advisory (aligned with Type 4) and asset management (aligned with Type 9), without deeming provisions for pre-existing entities; VA managers may face custody restrictions to licensed providers. No grandfather
Suggested Considerations
- Pre-Application Engagement: Contact SFC immediately for discussions on VA custodian licensing, especially for existing VATPs/banks holding keys.
- License Applications: Prepare applications for VA dealer/custodian licenses once regimes commence; appoint responsible officers/managers-in-charge meeting fit-and-proper criteria, implement cold wallet infrastructure, private key controls, insurance, audits, and business continuity plans.
- Custody Segregation: Existing intermediaries/VA dealers must transition client VA custody to SFC-licensed VA custodians; cease use of non-compliant overseas providers.
- Compliance Mapping: Review operations against Type 1/Type 13 financial resources, core function authorizations, and exemptions; assess staking/MPC services for custody capture.
- Monitor Further Consults: Track incoming VA advisory/management regimes and adjust for no deeming provisions.
Compliance Impact
Urgency: High – Conclusions signal imminent 2026 legislation and licensing without transitional relief, requiring firms to build infrastructure (e.g., licensed custody partnerships, RO appointments) amid a two-tier market (trading segregated from custody) to avoid operating unlicensed post-implementation; non-compliance risks enforcement, as seen in prior VA circulars, while opportunities arise fo
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original SFC source before acting. Full disclaimer.
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