Web3 Lawyer In-Depth Policy Interpretation | Hong Kong Virtual Asset Trading Platform New Regulations (Part 2): New Circular Released, Are the Boundaries of Virtual Asset Business Redefined?

Authors: Guo Fangxin, Sha Jun

At the end of the year, riding the momentum of HashKey's listing, the Hong Kong Financial Services and the Treasury Bureau and the Securities and Futures Commission jointly announced that, in addition to advancing the licensing regulation of "virtual asset trading" and "virtual asset custody" services under the original regulatory framework as planned, they are also preparing to introduce new licenses for these two services: one for "providing advice on virtual assets" and another for "virtual asset management," and public consultations have already begun. If all goes well, the mainstream core services of virtual assets—"trading," "custody," "investment advisory," and "asset management"—will be fully connected and regulated under separate licenses.

At this point, some readers might find it strange, aren't these services already available in Hong Kong? It feels like the train has already left the station, but how come when we look back, we find that tickets haven't even started selling?

As of now, only 11 specialized platforms holding VATP licenses can operate virtual asset trading in Hong Kong, while separate services for virtual assets, such as trading, investment advisory, and asset management, are achieved through upgrades of traditional licenses (1, 4, 9), essentially building a temporary structure on the foundation of traditional licensing rules. The significance of the new regulations lies in the fact that these important separate services are being licensed individually, each with its own responsibilities. Crypto Salad believes that the signal being released is quite clear: the regulation of virtual assets needs to pave its own road and should indeed pave its own road.

However, the formal issuance of separate licenses is likely to wait until 2026. Looking back, this year, for licensed virtual asset trading platforms, the Securities and Futures Commission issued two key circulars on November 3, 2025. Crypto Salad has previously analyzed one of them, see the public account “Web3 Lawyer In-Depth Policy Interpretation | New Regulations for Hong Kong Virtual Asset Trading Platforms (Part 1): ‘Circular on Sharing Liquidity among Virtual Asset Trading Platforms’. Today, let's discuss the second one in detail: ‘Circular on Expanding the Products and Services of Virtual Asset Trading Platforms.’

I. What does the Circular say?

Those on the front lines of the industry can feel that the reality of virtual asset business has clearly exceeded the original VATP regulatory framework's expectations. The initial licensing system was purely designed around "centralized virtual asset trading platforms," with core focuses on trade matching, customer asset segregation, and basic market order maintenance. However, with the continuous emergence of stablecoins, tokenized securities, RWAs, and various investment products linked to digital assets, the role that platforms play in practice has long gone beyond that of a pure trading venue.

In this context, the real contradiction faced by regulators is no longer "should these businesses exist," because if they continue to be excluded from a clear regulatory framework, it will only allow the market to evolve in a gray area. Rather than letting practitioners find ways to circumvent the rules, it is better to clearly outline what can be done while also solidifying the corresponding responsibilities. We believe this is the starting point of this circular.

From the specific content, the circular brings several seemingly "loosened" measures at the platform level, but in reality, it redistributes various responsibilities.

First, it adjusts the rules for token inclusion. In the past, for a virtual asset to be listed on a VATP platform, it typically needed to meet a minimum trading track record requirement of at least 12 months, which essentially used time to filter risks. However, in practice, this approach is not always reasonable: a project that has been around for a long time does not necessarily mean that information is sufficient or risks are controllable; conversely, a newly launched project may not lack adequate disclosure and prudent assessment.

It is important to note that this circular does not completely eliminate the 12-month track record requirement but explicitly provides exemptions in two specific situations:

First, for virtual assets offered only to professional investors, and second, for designated stablecoins issued by licensed issuers from the Monetary Authority. In other words, the Securities and Futures Commission does not deny the value of track records but acknowledges that the risk assessment methods for different investor groups and asset types should not be one-size-fits-all. Rather than using a formal time threshold to "block risks" for platforms, it is better to require platforms to assume more substantive judgment responsibilities.

Correspondingly, the circular also strengthens disclosure requirements. For virtual assets that do not have a 12-month track record but are offered only to professional investors, licensed platforms must clearly indicate the relevant situation on their websites or applications and provide adequate risk warnings.

The second important change is that the Securities and Futures Commission has, for the first time, clearly stated at the licensing condition level that VATP platforms can distribute tokenized securities and investment products related to digital assets, provided they comply with the existing regulatory framework.

Currently, VATPs have already taken on a role similar to that of a "product entry point." Once they enter a new distribution role, the platforms face not only counterparty risks but also typical financial product distribution responsibilities, including product understanding, suitability assessments, and information disclosure obligations. This is not a concession from the regulators but a change in responsibilities brought about by a change in roles.

The third adjustment focuses on custody rules. The circular allows licensed platforms to provide custody services for virtual assets or tokenized securities that are not traded on the platform through their affiliated entities.

What changes will this bring? In current practice, many projects' assets do not necessarily need to be traded on the platform, but clients still wish for regulated institutions to hold or manage the relevant assets. Therefore, the design for such demands has not been smooth and often requires multi-layer arrangements to barely achieve this. After the circular takes effect, it essentially supplements a clearer compliance path for these existing business needs.

If the main body of the circular outlines the overall policy direction, then the three appendices reflect the Securities and Futures Commission's considerations on "how to implement" at the operational level.

Appendix I revises the token inclusion rules, superficially lowering the entry threshold for some products, but in essence, it does not weaken the platform's prudential obligations. The threshold has not disappeared; VATPs need to support their judgments with more solid due diligence and disclosure.

(The above image is taken from the Hong Kong Securities and Futures Commission's official website)

Appendices II and III further clarify the boundaries of the platform's operational scope and the arrangements for holding client assets during the distribution process. By redefining "related activities," the Securities and Futures Commission officially includes the distribution of investment products related to digital assets, tokenized securities, and custody services for non-platform traded assets within the practice scope of VATPs. Additionally, in distribution activities, platforms are allowed to open and maintain trust accounts or client accounts in their own name with relevant custodians to hold these assets on behalf of clients. These adjustments do not lower the requirements for protecting client assets but rather ensure that the business structure can truly "run smoothly" from a legal and regulatory perspective.

(The above image is taken from the Hong Kong Securities and Futures Commission's official website)

II. What changes should practitioners pay attention to after the circular?

With the issuance of the new circular, for VATPs, activities that previously might have been uniformly categorized as "platform services" encompassing trading, custody, research, product introduction, and some distribution activities, now must more clearly distinguish which actions belong to the core functions of the exchange and which are approaching independent custody, distribution, or advisory activities, and achieve compliance through different entity arrangements and business boundary delineations.

For other participants, such as OTC and custody service providers, the space that previously relied on ambiguous roles or functional overlaps to operate is rapidly narrowing, and now they must more clearly answer one question: What specific type of virtual asset service are they engaged in? And under what regulatory framework should they assume corresponding responsibilities?

III. Conclusion

Overall, what this circular reflects is not a sudden shift in regulatory attitude, but a more realistic choice: VATP platforms are gradually evolving from a single trading venue to a compliance node connecting trading, products, and asset management, and regulators are correspondingly shifting their focus from formal conditions to whether platforms are truly assuming their due responsibilities.

This circular does not mean that business has been "loosened" overnight, but the change in regulatory attitude is clear: compliance is no longer just about "staying within the lines," but about being responsible for one's judgments; for project parties and investors, it also means that regulatory expectations are gradually becoming clearer, rather than continuing to rely on ambiguous spaces for survival.

Moving forward, how far the market can go will no longer depend on whether regulators provide space, but on whether participants are truly ready to operate under a clearer and more serious rule system. Special Statement: This article is an original work by the Crypto Salad team, representing only the personal views of the author and does not constitute legal advice or consultation on specific matters. If you need to reprint the article, please contact us privately to discuss authorization matters: shajunlvshi.