On June 1, 2023, a new regulatory regime governing cryptocurrency will come into effect in Hong Kong. Under the new rules, the cryptocurrency market will be opened to retail investors, while cryptocurrency exchanges are required to obtain virtual asset service provider, or VASP, licenses. In the past, Hong Kong’s minimal regulation over virtual assets led to an influx of digital asset investment. The recent policy shift, announced by the Hong Kong government in December 2022, is expected to further transform the city into a crypto hub.
In 2017, Hong Kong’s financial regulatory, the Securities and Futures Commission (“SFC”), stated that Bitcoin was not a security and therefore did not fall under its purview. The SFC maintained this laissez faire stance in 2019 when it introduced a “regulatory sandbox” under which fintech companies had the option to apply for cryptocurrency exchange licenses. As of February 2023, only two cryptocurrency exchanges—OSL Digital Securities Limited and Hash Blockchain Limited—have obtained the license. Other financial regulators in the city, such as the Hong Kong Monetary Authority and the Insurance Authority, likewise exercise light oversight over the digital assets sector.