introduction

At the end of the year, riding the wave of HashKey's IPO, the Hong Kong Financial Services and Treasury Bureau and the Securities and Futures Commission jointly announced that, in addition to proceeding with the planned licensing of "virtual asset trading" and "virtual asset custody" services under the Anti-Money Laundering Ordinance (AMLO) within the existing regulatory framework, they are also preparing to create new licenses for two other services: one for "providing advice on virtual assets" and the other for "virtual asset management," and public consultation has already begun. If all goes smoothly, the core services across the entire virtual asset value chain—"trading," "custody," "investment advisory," and "asset management"—will be integrated and regulated through separate licenses.

At this point, are any readers wondering if these services are no longer available in Hong Kong? It feels like the train has been running for ages, but when I look back, I find that tickets haven't gone on sale yet?

Currently, only 11 specialized platforms holding VATP licenses are authorized to operate virtual asset trading platforms in Hong Kong. Separate virtual asset services, such as trading, investment advisory, and asset management, achieve compliance through upgrades to traditional licenses (1, 4, 9), essentially building a temporary structure on top of existing licensing rules. The significance of the new regulations lies in separating these important individual services into their own licenses, each fulfilling its specific responsibilities. Crypto Law believes the signal is quite clear: the regulation of virtual assets requires a separate path, and should indeed be built independently.

However, formal licensing for virtual asset trading platforms is estimated to be delayed until 2026. Looking back, the Securities and Futures Commission (SFC) issued two key circulars on November 3, 2025, regarding licensed virtual asset trading platforms. CryptoSalt has already analyzed one of these circulars in the previous article: "Interpretation of New Regulations for Hong Kong Virtual Asset Trading Platforms (Part 1): Circular on Shared Liquidity of Virtual Asset Trading Platforms." Today, we'll discuss the second part in detail: "Circular on Expanding the Products and Services of Virtual Asset Trading Platforms."

What did the circular say?

Those on the front lines of the industry can attest that the reality of virtual asset transactions has significantly exceeded the original vision of the VATP regulatory framework. The initial licensing system was designed solely around "centralized virtual asset trading platforms," with a core focus on transaction matching, client asset segregation, and maintaining basic market order. However, with the emergence of stablecoins, tokenized securities, RWA, and various investment products linked to digital assets, the role of these platforms in practice has long since transcended that of a mere trading venue.

In this context, the real challenge facing regulators is no longer whether these businesses should exist, because continuing to exclude them from a clear regulatory framework will only allow the market to evolve in a gray area. Rather than letting practitioners find ways to circumvent the rules, it's better to clearly define what is permissible and simultaneously assign corresponding responsibilities. We believe this is precisely the starting point of this circular.

In terms of specific content, the circular brings several seemingly "relaxed" measures at the platform level, but in reality, it redistributes various responsibilities.

First, there are adjustments to the rules regarding token inclusion. Previously, for virtual assets to be listed on the VATP platform, they typically needed to have at least 12 months of trading history. This standard essentially used time to screen for risk. However, in practice, this approach is not always reasonable: a project's longevity does not necessarily mean sufficient information or manageable risk; conversely, a newly launched project may not necessarily lack adequate disclosure and prudent evaluation.

It is important to note that this circular did not completely eliminate the 12-month track record requirement, but rather explicitly granted exemptions in two specific circumstances:

Firstly, there are virtual assets offered only to professional investors; secondly, there are designated stablecoins issued by issuers licensed by the Hong Kong Monetary Authority (HKMA). In other words, the SFC is not denying the value of track records, but rather acknowledging that risk assessment methods should not be applied uniformly to different investor groups and asset types. Rather than using a formal time threshold to "shield" platforms from risk, it would be better to require platforms to assume more substantial responsibility for their own judgment.

Accordingly, the circular also strengthened 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 this on their websites or applications and provide sufficient risk warnings.

The second important change is that the Securities and Futures Commission (SFC) has for the first time clarified the licensing conditions, stating that the VATP platform can distribute tokenized securities and investment products related to digital assets, provided that it complies with the existing regulatory framework.

Currently, VATP has assumed a similar function as a "product entry point" in reality. Once it assumes a new distribution role, the platform will no longer only face counterparty risk, but also typical financial product distribution responsibilities, including product understanding, suitability assessment, and information disclosure obligations. This is not a concession by regulators, but a change in responsibilities brought about by a change in role.

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

What changes will this bring? In current practice, many project assets do not necessarily need to be traded on the platform, but clients still want regulated institutions to hold or manage these assets. Therefore, designing for such requirements is not straightforward and often requires multiple layers of arrangements to barely achieve. After the circular takes effect, it essentially provides 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 CSRC's considerations on "how to implement" the policy at the operational level.

Appendix I's revisions to the token inclusion rules, while superficially lowering the listing threshold for some products, do not actually weaken the platform's due diligence obligations. The thresholds haven't disappeared; VATP simply needs to support its judgments with more robust due diligence and disclosure.

Appendix II and Appendix III further clarify the boundaries of the platform's business scope and the arrangements for holding customer assets during the distribution process. Through the redefinition of "relevant activities," the SFC formally includes the distribution of digital asset-related investment products, tokenized securities, and custody services for assets not traded on the platform within VATP's scope of practice. Simultaneously, in distribution operations, platforms are permitted to open and maintain trust accounts or customer accounts in their own name with relevant custodians to hold these assets on behalf of customers. These adjustments do not lower the requirements for customer asset protection, but rather ensure that the business structure is truly "workable" from a legal and regulatory perspective.

What changes should practitioners be aware of after the circular?

The issuance of the new circular means that VATP could previously include trading, custody, research, product introduction, and even some distribution activities under the category of "platform services," as long as they were all subject to VATP license regulation. However, now it must more clearly distinguish which behaviors are core functions of the trading platform and which are close to independent custody, distribution, or investment advisory activities, and achieve compliance through different entity arrangements and business boundary divisions accordingly.

For other participants, such as OTC and custody service providers, the space for operating by relying on ambiguous roles or overlapping functions is rapidly shrinking. Now they must answer a more specific question: What type of virtual asset service are they specifically engaged in? And under what regulatory framework should they bear corresponding responsibilities?

in conclusion

Overall, this circular does not reflect a sudden shift in regulatory attitude, but rather a more realistic choice: the VATP platform is gradually evolving from a single trading venue into a compliance node connecting trading, products, and asset management, and the regulators are correspondingly shifting their focus from formal conditions to whether the platform is truly fulfilling its due responsibilities.

This circular does not mean that business has been "unleashed" overnight, but the change in regulatory attitude is clear: compliance is no longer just about "stepping on the line without crossing it," but about taking responsibility for one's own judgment; for project owners and investors, it also means that regulatory expectations are gradually becoming clearer, rather than continuing to rely on ambiguous spaces to survive.

Going forward, how far the market can go will no longer depend on whether regulators provide room for maneuver, but rather on whether participants are truly prepared to operate under a clearer and more rigorous set of rules.