A Turning Point for Digital Finance: Hong Kong’s Regulatory Framework for Virtual Assets and RWA Tokenisation

Introduction and overview

Hong Kong is solidifying its position as a premier global fintech hub, strategically evolving into an era of sophisticated, regulated growth. Key trends driving this evolution are the implementation of comprehensive regulatory frameworks for virtual assets and stablecoins, alongside pioneering initiatives in the tokenisation of real-world assets. These developments collectively signal a mature market shift, integrating digital finance with the traditional economy under the overarching principle of “same activity, same risks, same regulation”.

Licensing regimes for virtual asset (VA) custodian, dealing, advisory and management services

Hong Kong is moving from piecemeal VA rules to a full value-chain regime in 2026, with new licences for VA custodian and dealing services and proposed regimes for VA advisory and management services under the Anti-Money Laundering and Counter Terrorist Financing Ordinance (Cap. 615 of the Laws of Hong Kong) (AMLO). These developments will reshape fintech and the broader VA ecosystem, bringing VA service providers much closer to the regulatory model that applies to traditional securities and funds in Hong Kong.

Since June 2023, Hong Kong has required virtual asset trading platforms (VATPs) that serve Hong Kong investors or actively market into Hong Kong to be licensed by the Securities and Futures Commission (SFC). In December 2025, the Financial Services and the Treasury Bureau (FSTB) and the SFC published consultation conclusions on legislative proposals for a standalone VA custodian service provider licence, alongside conclusions on a new regime for VA dealing services. In the same VA dealing paper, they launched a further consultation on licensing VA advisory service providers and VA management service providers, with all four regimes to be implemented through amendments to the AMLO and a bill targeted for introduction into the Legislative Council in 2026.

VA custodian licence – focusing on key risk

The proposed VA custodian licence under the AMLO targets entities that safekeep “any instrument enabling the transfer of VAs” for clients, with a clear focus on control over private keys or equivalent mechanisms. Respondents generally agreed that such entities pose the core risks in VA custody, including cyber risk, key compromise and technology failures that can lead to loss or unauthorised transfer of client assets.

Importantly, the conclusion paper clarifies that top-level trustees or fund managers that delegate safekeeping to a third-party custodian will not generally be treated as VA custodians, reflecting an intention to regulate the entity that actually controls the keys rather than those with purely administrative or oversight roles. The SFC emphasises a technology neutral approach, so models using multi-party computation (MPC), hardware security modules or smart contracts can still fall within scope where they enable unilateral transfer of client VAs.

Under the revised proposals, a licence or registration will be required where an entity can unilaterally transfer client VAs, whereas an MPC provider that enables clients to reconstruct keys and move assets independently may fall outside the regime. Custodians of tokenised securities alone are out of scope, because “virtual assets” under the AMLO expressly exclude securities and futures contracts.

The SFC also addresses the common group custody model in which one group entity is the licensed custodian, but overseas affiliates support key management or signing. The conclusion paper indicates that only the entity bearing responsibility for safeguarding client VAs needs the VA custodian licence, provided it retains unilateral control over client assets and group entities do not hold themselves out to Hong Kong investors as VA custodians. However, individuals within group entities who are materially involved in key management, transaction signing or other core custody functions are expected to be licensed or engaged as “relevant individuals” and accredited to the licensed VA custodian.

Financially, licensed VA custodian service providers (other than banks and certain payment institutions already subject to the Hong Kong Monetary Authority (HKMA)’s oversight) will be subject to baseline requirements aligned with Type 13 “depositary services” licensees. Specifically, the SFC will require minimum paid-up share capital of HKD10 million and minimum liquid capital of HKD3 million, with flexibility to impose higher requirements calibrated to business scale and risk.

On permitted activities, the SFC proposed to allow regulated custodians to provide core safekeeping, deposit and withdrawal functions, and to settle transactions for licensed VA dealers, as well as to allow staking services subject to robust safeguards consistent with guidance issued to VATPs. Exemptions are expected for group-only custody, limited self-custody of new tokens by private equity or venture capital fund managers and certain legal and accounting professionals holding backup keys or acting under court appointments, alongside an exemption for licensed stablecoin issuers that only provide custody for their own stablecoins.

VA dealing licence – extending beyond platforms

The proposed VA dealing licence under the AMLO is designed to capture intermediaries that arrange or execute VA transactions, including those not operating order book platforms. After consultation, the FSTB and the SFC decided to align the definition of “dealing in virtual assets” closely with Type 1 “dealing in securities” under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), focusing on making or offering to make agreements, or inducing agreements, for acquisition, disposal, subscription for or underwriting of VAs.

This activity-based approach means that payment-service providers, brokers, OTC desks and other intermediaries can all fall within scope if they operate “by way of business” and undertake VA dealing, even where VA transfers are incidental to cross-border payments. Activities in VA referencing derivatives and structured products will generally remain under the SFO Types 1 (dealing in securities), 2 (dealing in futures contracts) and 11 (dealing in OTC derivative products or advising on OTC derivative products) regimes, and the definition avoids duplication by removing an earlier limb that would have overlapped with those products.

For VA dealing service providers, the SFC will adopt regulatory requirements broadly consistent with Type 1 intermediaries, including financial resources requirements. The conclusion paper confirms baseline capital of HKD5 million in paid-up share capital and minimum-required liquid capital of up to HKD3 million depending on the business model, with the scope for the SFC to impose additional buffers such as excess liquid capital equivalent to 12-months’ operating expenses where warranted.

A central policy choice is that VA dealing service providers will be required to place client VAs with SFC-regulated VA custodian service providers, at least in the early years of the regime. Although some respondents favoured allowing overseas-regulated custodians in jurisdictions meeting the standards of the Basel Committee on Banking Supervision or International Organization of Securities Commissions, the authorities have reservations about enforceability and oversight and prefer initially to anchor custody onshore for investor protection reasons.

Recognising that VA liquidity is fragmented globally, the conclusion paper supports allowing licensed VA dealers to access non-SFC-licensed VATPs and overseas liquidity providers, subject to stringent safeguards. These include robust due diligence on regulatory status, financial soundness and anti-money laundering and counter-terrorist financing controls, as well as enhanced disclosure of cross-border risks to clients.

The SFC links this to its ASPIRe “Access” pillar and to the separate circular that already allows SFC-licensed VATPs to share order books with intra-group platforms, illustrating a broader direction of controlled integration with global liquidity pools. However, settlement, custody and client asset protection must remain compliant with Hong Kong’s requirements, including the use of SFC-regulated VA custodians for client assets held by dealers.

VA advisory and management regimes – completing the VA value chain

Section B of the dealing conclusion paper sets out further consultation proposals for new licensing regimes for VA advisory service providers and VA management service providers under the AMLO. The authorities have recognised that some advisers and asset managers already engage with VAs, often under SFO Type 4 and Type 9 licences and existing SFC–HKMA joint circulars, and wish to create a coherent AMLO-based framework following the “same activity, same risks, same regulations” principle.

Under the advisory proposal, any person who carries on a business of providing “advising on virtual assets” in Hong Kong will need to be licensed or, in the case of banks, registered with the SFC. The draft definition covers both personal recommendations on whether, when or on what terms VAs should be acquired or disposed of, and the issuance of analyses or reports intended to facilitate investment decisions in VAs, mirroring the scope of SFO Type 4 advisory activities.

Proposed exemptions for VA advisory services reflect the existing SFO model, including wholly-owned group companies advice, advice wholly incidental to licensed VA dealing or solely for the purposes of licensed VA fund management, and advice by solicitors, counsels and certified public accountants where incidental to their professional practice. Advisory via generally available publications or broadcasts would also be exempt, consistent with familiar securities advisory carve-outs.

For VA management service providers, the proposed regime will capture anyone managing a portfolio of VAs for another person on a discretionary basis, again with exemptions for wholly-owned group companies’ mandates, acts incidental to licensed VA dealing, and certain professional trustees and solicitors, counsels and certified public accountants. Notably, the authorities propose not to set a de minimis threshold: any portfolio containing VAs, regardless of its percentage exposure, can trigger the requirement to be licensed or registered for VA management, which is intended to prevent regulatory arbitrage and reflect the inherent risk profile of VA exposure.

Both VA advisory and VA management licensees would be subject to AML and record-keeping obligations under Schedule 2 to the AMLO, in line with other AMLO-regulated institutions. Financial resources requirements are proposed to align with SFO Types 4 and 9. For each regime, there is a minimum paid-up share capital of HKD5 million and minimum liquid capital of HKD100,000 where no client assets are held, or HKD3 million where client assets are held.

On custody, the consultation paper explicitly raises whether VA management service providers should be required to use only SFC-regulated VA custodians for private funds they manage or if they are permitted to appoint any custodian subject to due diligence, representing one of the key open questions for 2026. The paper also contemplates a limited self-custody exemption for private equity and venture capital fund managers investing in new tokens that are not yet supported by SFC-regulated custodians, echoing the bespoke exemption under the custodian regime.

Practical implications for market participants

For existing VA custodians and exchanges, 2026 will be the year to transition from bespoke SFC conditions to a statutory AMLO licence, including re-examining key management structures, individual licensing coverage and capital planning. Groups that currently rely heavily on overseas affiliates for technology and operations will need to ensure that a Hong Kong-licensed entity retains unilateral ability to transfer client assets and that relevant staff of group entities are properly accredited and supervised.

Broker dealers, over-the-counter desks and payment providers with VA exposure should map their activities against the new VA dealing definition and likely advisory and management scopes. A careful assessment is needed of whether VA flows are purely proprietary or within wholly-owned group companies, or whether there is any inducement or arrangement of third-party client transactions that would trigger a licence, particularly where VA conversion is embedded in cross-border payment solutions.

For asset managers, private banks and family offices, the proposed advisory and management regimes will require a more granular look at how VA research, recommendations and portfolio management are delivered. Firms that currently treat modest VA allocations as de minimis will need to consider whether to obtain dedicated VA advisory or management licences, restructure products, or confine VA exposure to SFC-approved channels such as SFC-authorised VA funds and exchange-traded products.

The Stablecoins Ordinance

The establishment of a comprehensive regulatory framework for stablecoins represents one of the most significant developments in Hong Kong’s fintech journey and marks a pivotal moment in Hong Kong’s approach to digital currencies. Following a rigorous legislative process that began with a public consultation in December 2023, the Stablecoins Bill was passed by the Legislative Council on 21 May 2025. The resulting Stablecoins Ordinance (Cap. 656 of the Laws of Hong Kong) officially took effect on 1 August 2025, establishing a mandatory licensing regime and a robust regulatory framework for the issuance and offering of specified stablecoins.

The Stablecoins Ordinance is a direct response to the increasing prevalence of digital currencies and seeks to address regulatory gaps while ensuring consumer protection, financial stability, and the integrity of the financial system. The primary regulator under this new law is the HKMA, which is now responsible for licensing, supervising, and enforcing compliance among stablecoin issuers.

Scope and licensing criteria

The scope of the Stablecoins Ordinance is carefully defined. It regulates “specified stablecoins”, which are cryptographically secured digital representations of value that purport to maintain a stable value by referencing one or more official currencies (fiat currencies), or other units of account or stores of economic value specified by the HKMA. Importantly, existing regulated products, such as bank deposits, securities, futures contracts, and stored value facilities already covered under other regulatory regimes, are excluded from the definition of stablecoins.

Under the Stablecoins Ordinance, any person who, in the course of business, issues a specified stablecoin in Hong Kong, or issues one outside Hong Kong that references the Hong Kong dollar, must obtain a licence from the HKMA. The Stablecoins Ordinance also strictly controls the offering and marketing of stablecoins. Only licensed stablecoin issuers, authorised institutions, licensed virtual asset trading platforms, and SFC-licensed corporations can offer specified stablecoins in Hong Kong or actively market (whether in Hong Kong or elsewhere) such offering to the Hong Kong public.

The licensing criteria are stringent and designed to ensure that only fit and proper entities can operate. For instance, a licensee is required to have a minimum paid-up share capital of HKD25 million and must maintain adequate financial resources at all times. It must maintain a pool of high-quality, highly liquid reserve assets for each type of specified stablecoin it issues, with a market value at least equal to the par value of all outstanding stablecoins. These reserve assets must be segregated from the licensee’s own assets. Complementing this is a clear redemption right that a licensee must honour redemption requests at par value without unduly burdensome conditions or unreasonable fees.

HKMA guidelines

The HKMA has supplemented the Stablecoins Ordinance with two crucial guidelines that provide further details on compliance expectations.

• The Guideline on Supervision of Stablecoin Issuers elaborates on the minimum criteria for licensees, covering areas such as governance (requiring at least one-third of the board members to be independent non-executive directors), risk management frameworks, and business conduct. It explicitly prohibits licensees from paying interest to stablecoin holders, reinforcing the characterisation of stablecoins as a payment mechanism rather than an investment vehicle.
• The Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers) sets out a risk-based framework for combating financial crime, including requirements for customer due diligence, transaction monitoring (including for unhosted wallets), travel rule compliance, and the use of blockchain analytics tools to detect suspicious activity.

As of now, the HKMA’s register of licensed issuers is open and will be updated in a timely manner, though no licences have been granted yet. Through its combination of rigorous prudential standards and robust consumer safeguards, the Stablecoins Ordinance establishes a secure and predictable environment for innovation, solidifying Hong Kong’s foundation for the next phase of digital asset development.

Tokenisation of real-world assets (RWAs)

Beyond the realm of digital-native assets, Hong Kong is aggressively developing the tokenisation of RWAs, strategically bridging the gap between traditional finance and blockchain technology. In this context, a “real-world asset” refers to a physical asset or a traditional financial asset that is represented digitally on a blockchain. These assets encompass a vast spectrum, from financial instruments such as equities, bonds, and funds, to tangible assets like real estate, intellectual property, natural resources, art, and income streams. By converting these into digital tokens, the tokenisation of RWAs aims to unlock liquidity, enhance efficiency, and democratise access to investment opportunities.

SFC guidance

The SFC has provided crucial guidance on tokenised securities-related activities and SFC-authorised investment products. While this guidance focuses on the issuance of tokenised financial products such as green bonds, commercial papers, warrants, and funds, it offers valuable insights applicable to the broader RWA landscape. The SFC’s fundamental stance is that tokenised financial products are fundamentally traditional financial products with a tokenisation wrapper, meaning existing legal and regulatory requirements for securities markets apply equally to them.

Intermediaries play a critical role in the RWA tokenisation ecosystem, including product providers, fund managers, and distributors. The SFC guidance mandates that product providers remain ultimately responsible for the entire tokenisation arrangement, regardless of any outsourcing of technical functions like smart contract audits or ledger maintenance. They must conduct thorough due diligence on issuers, the underlying products, and third-party service providers, and ensure proper records of token holders’ ownership interests are maintained. Robust measures are required to manage cybersecurity risks, data privacy, and system outages, with specific restrictions on using public-permissionless blockchain networks without additional controls. Furthermore, adequate disclosure regarding the tokenisation arrangement, settlement finality, and associated risks is mandatory.

Project Ensemble

On the infrastructure front, the HKMA launched the Project Ensemble Sandbox in August 2024. This groundbreaking initiative is designed to explore innovative financial market infrastructure that allows seamless interbank settlement of tokenised money through a wholesale central bank digital currency (wCBDC).

The Project Ensemble Sandbox focuses on four key themes: fixed income and investment funds, liquidity management, green and sustainable finance, and trade and supply chain finance. It enables industry participants to conduct end-to-end testing of tokenised asset transactions in practical business scenarios, examining the technical interoperability among tokenised assets, tokenised deposits, and wCBDC. This is a significant stride, as the ability to settle tokenised asset transactions instantaneously and irrevocably with tokenised money can eliminate settlement risk and unlock the full potential of tokenisation.

Building on the successful outcomes of the Project Ensemble Sandbox, on 13 November 2025, the HKMA announced the new phase of Project Ensemble and launched EnsembleTX, which will operate throughout 2026. In this phase, the HKMA, participating banks, and other industry pioneers aim to enable faster, more transparent, and more efficient settlement of real-value tokenised transactions.

To empower market participants to utilise tokenised deposits in money market fund transactions and to manage liquidity and treasury needs in real time, interbank settlement of tokenised deposit transactions will initially be facilitated via the HKD Real-Time Gross Settlement system and will be progressively upgraded and enhanced to support settlement in tokenised Central Bank Money on a 24/7 basis.

Landmark projects

The practical application of these frameworks is already visible through landmark projects. The first major RWA initiative to gain global attention was the Hong Kong government’s issuance of the world’s first tokenised green bond in February 2023. This HKD800 million one-year bond was a proof of concept that demonstrated Hong Kong’s conducive legal and regulatory environment for innovative bond issuances. Following this success, the Hong Kong government respectively issued the approximately HKD6 billion multi-currency tokenised green bond in February 2024 and the approximately HKD10 billion multi-currency tokenised green bond in November 2025, further solidifying the market’s foundation.

Following the public sector’s lead, in August 2024, Longshine Group and Ant Digital Technologies completed what is recognised as China’s first cross-border RWA financing based on new energy physical assets, conducted within the Project Ensemble Sandbox framework. The project tokenised future revenue streams from electric vehicle charging stations into a real-world asset fund token, raising approximately RMB100 million. This innovative structure used IoT devices to stream operational data onto a blockchain, ensuring transparency and trust for investors regarding the asset’s performance.

Most recently, in November 2025, the Hong Kong and China Gas Company Limited (Towngas) completed its first RWA tokenisation project. Towngas utilised a HKD100 million credit facility provided by Chong Hing Bank for its subsidiary, Towngas Telecom (TGT), as the underlying asset. Ant Digital Technologies’ Jovay Layer 2 blockchain platform provided the technological backbone, ensuring the secure and reliable circulation of tokenised information. Through this process, key financial and operational data is uploaded onto the blockchain in real time for verification by authorised institutions. The credit facility for TGT will be deployed to develop artificial intelligence data centres and cross-border infrastructure projects, demonstrating how RWA tokenisation can create an innovative financing channel for core business expansion.

These collective efforts, from government pilots to corporate adoption, signal a strong and practical commitment to making Hong Kong a leading global centre for RWA innovation.

Outlook and conclusion

Hong Kong’s fintech landscape has undergone a clear transformation to become a regulated, stable and mature ecosystem. The simultaneous development of licensing regimes for VA and stablecoins, combined with pioneering RWA tokenisation projects, creates a comprehensive and attractive environment. This strategic approach positions Hong Kong to lead the next wave of digital finance, integrating it safely and effectively into the heart of its global financial system.