The regulatory landscape for cryptocurrency exchanges in Hong Kong can be complex, especially when distinguishing between licenses and permissions. With the Securities and Futures Commission (SFC) actively updating its list of authorized virtual asset trading platforms, understanding the exact requirements is essential for any business aiming to operate legally in this space.
On October 3, 2024, the SFC updated its official website to include HKVAX as the third officially licensed virtual asset trading platform, joining OSL Exchange and HashKey Exchange. According to reports from Ming Pao, a leading Hong Kong news outlet, HKVAX holds both Type 1 (Securities Trading) and Type 7 (Automated Trading Services) licenses, enabling it to offer OTC brokerage, cryptocurrency trading, and comprehensive virtual asset custody services to investors.
This raises a common question among entrepreneurs: To run a compliant crypto exchange in Hong Kong, do you need a Virtual Asset Trading Platform (VATP) license, or are Type 1 and Type 7 licenses sufficient? Let’s break down the regulatory framework and clarify the relationship between these credentials.
Overview of Licensed Virtual Asset Platforms in Hong Kong
As of late 2024, the SFC maintains a public list of licensed and provisionally approved virtual asset platforms. Here’s a snapshot of key players and their regulatory status:
- OSL Exchange: Holds Type 1 and Type 7 licenses, plus VATP permission
HashKey Group: Multiple entities under one umbrella:
- Hash Blockchain Limited (HashKey Exchange): Type 1, Type 7, and VATP permission
- HBS (Hong Kong) Limited: Type 1 and Type 4 licenses
- HashKey Capital Limited: Type 4 and Type 9 licenses
- HKVAX: Holds Type 1 and Type 7 licenses
- BGE, VDX, bitV: No licenses held
- HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, Bullish, Crypto.com, WhaleFin, Matrixport HK: Treated as having provisional VATP status
👉 Discover how top exchanges navigate Hong Kong's evolving crypto regulations
It’s important to note that “treated as licensed” means these platforms operate under interim permission, allowing them to serve only professional investors under strict limitations. They cannot offer services to retail clients or engage in high-risk activities such as margin trading, derivatives trading (e.g., futures), asset lending, or market making.
Despite the growing number of platforms with interim approval, only three—OSL, HashKey Exchange, and HKVAX—have secured full VATP status. Notably, all three also hold both Type 1 and Type 7 licenses.
So what’s the connection between the VATP permission and traditional financial licenses?
Understanding VATP Permission vs. SFC Licenses
In Hong Kong, any centralized platform offering virtual asset trading services to the public—or actively marketing to Hong Kong investors—must comply with two key regulatory frameworks:
1. The Securities and Futures Ordinance (SFO)
Regulates platforms dealing in security tokens—digital assets classified as securities. Under the SFO:
- Type 1 License: Required for securities trading activities.
- Type 7 License: Mandatory for platforms using automated systems to match buy/sell orders.
These apply when your platform facilitates trading of tokenized stocks, equity-linked tokens, or other regulated securities.
2. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)
Covers platforms trading non-security virtual assets, such as Bitcoin and Ethereum. AMLO mandates:
- Registration and compliance as a Virtual Asset Service Provider (VASP)
- Obtaining VATP permission from the SFC
Since a digital asset’s classification can change over time (e.g., from utility token to security), the SFC strongly recommends that exchanges apply under both regimes to ensure legal continuity and avoid regulatory breaches.
Key Financial Licenses for Crypto Businesses in Hong Kong
Under the SFO, financial activities are categorized into ten license types. For crypto-focused businesses, the most relevant include:
- Type 1: Securities dealing — essential if your platform lists security tokens
- Type 4: Advice on securities — needed if offering investment recommendations on crypto assets
- Type 7: Automated trading services — critical for any exchange using algorithmic order-matching
- Type 9: Asset management — required for managing client portfolios containing virtual assets
Other licenses (Types 2–3, 5–8, 10) are less relevant unless you're expanding into futures trading, leveraged forex, or corporate finance advisory.
👉 See how leading firms combine multiple licenses for full compliance
Matching Licenses to Your Business Model
You don’t need every license—only those aligned with your services.
If You’re Running a Pure Crypto Exchange
Focus on:
- VATP permission under AMLO (for non-security tokens)
- Type 1 and Type 7 licenses under SFO (if handling security tokens or automated trading)
Most major exchanges like OSL and HashKey Exchange follow this dual-track approach.
If You Offer Investment Advice
Whether through Telegram groups, research reports, or advisory services, you’ll need a Type 4 license. This applies equally to individuals and firms.
If You Manage Crypto Portfolios
A Type 9 license allows asset managers to legally invest in virtual assets on behalf of clients. Importantly:
- Holders of Type 9 licenses can conduct securities trading and provide advice without needing separate Type 1 or Type 4 licenses
- Existing fund managers can upgrade their current Type 9 license to include crypto exposure
This makes the Type 9 license a strategic entry point for traditional financial institutions entering Web3.
👉 Learn how asset managers are integrating crypto into portfolios
Frequently Asked Questions (FAQ)
Q: Is VATP permission the same as an SFC license?
No. VATP permission is granted under AMLO and allows trading of non-security virtual assets. It’s not a formal "license" but rather a regulatory green light under specific conditions. True SFC licenses (like Types 1 and 7) are issued under the SFO and cover securities-related activities.
Q: Can I operate without any license if I only serve overseas users?
If your platform doesn’t target Hong Kong investors or use local infrastructure (e.g., servers, marketing), you may avoid regulation. However, any active promotion in Hong Kong—even via social media—can trigger SFC oversight.
Q: Do I need both VATP permission and Type 1/7 licenses?
Yes, if your platform lists both security and non-security tokens. The safest path is dual compliance under both AMLO and SFO to future-proof your operations.
Q: What’s the difference between “licensed” and “treated as licensed”?
Only OSL, HashKey Exchange, and HKVAX are fully licensed. Others operate under “interim permission,” meaning they’re conditionally allowed to function while their applications are reviewed. These platforms face restrictions on client type and service scope.
Q: How long does it take to get approved?
The process typically takes 6 to 12 months, depending on application completeness, AML controls, custody solutions, and system audits. Early engagement with legal counsel is highly recommended.
Q: Can a company hold multiple licenses?
Absolutely. HashKey Group exemplifies this strategy—its subsidiaries hold various combinations of Types 1, 4, 7, and 9 licenses to support diverse services including trading, advisory, and fund management.
Final Thoughts: First-Mover Advantage in a Regulated Market
As of October 2024, only three platforms—OSL Exchange, HashKey Exchange, and HKVAX—have achieved full compliance with Hong Kong’s dual regulatory framework. Most others operate under temporary status with limited capabilities.
For new entrants, the message is clear: securing formal licensing isn’t just about legality—it’s about gaining competitive advantage. Licensed platforms can serve retail investors, offer broader products, and partner with traditional financial institutions.
Whether you're launching an exchange, advisory service, or asset fund, aligning your licensing strategy with your business model is crucial. By combining VATP permission with appropriate SFO licenses—especially Types 1, 7, or 9—you position your business at the forefront of Hong Kong’s regulated digital asset economy.
Regulation is no longer a barrier—it’s the foundation for trust, growth, and long-term success in Asia’s most dynamic financial hub.