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On 26 May 2026, the Financial Services and the Treasury Bureau (“FSTB”) and the Securities and Futures Commission (“SFC”) published their consultation conclusions on the legislative proposal to regulate virtual asset (VA) advisory and management service providers in Hong Kong.
With the overarching goal of introducing a bill into the Legislative Council in 2026 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”), these new regimes complete a critical node in Hong Kong’s digital asset ecosystem. However, beneath the surface of broad market support lies a shifting regulatory landscape that demands immediate attention, particularly for traditional asset managers who may have previously considered themselves outside the SFC’s virtual asset crosshairs.
Adhering strictly to the “same activity, same risks, same regulation” principle, the SFC is establishing a framework that mirrors the traditional Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance (“SFO”). For both existing VA-native firms and traditional asset managers, the margin for error has just been drastically reduced.
The “no de minimis” trap for traditional Type 9 asset managers
Perhaps the most commercially significant takeaway from the consultation conclusions is the explicit confirmation that the regulators will not set a de minimis threshold for the VA Management Regime.
Historically, traditional Type 9 asset managers could manage portfolios with limited VA exposure (below the established de minimis threshold) without triggering the full weight of VA-specific licensing conditions. That safe harbour is now gone. Intermediaries licensed by or registered with the SFC to carry on Type 9 regulated activities under the SFO, which currently manage portfolios with VA exposure below the de minimis threshold, will be required to obtain a licence or registration under the new VA Management Regime.
Crucially, they will be subject to the exact same regulatory standards as full-scale VA fund managers. For traditional funds that have dabbled in tokenised assets or hold small crypto allocations, this triggers an immediate need for comprehensive gap analyses to ensure their current AML/CFT frameworks, valuation policies, and risk management systems meet the exacting standards of the AMLO.
The “hard stop” threat: no deeming arrangements
The regulators are playing hardball regarding the transition. The FSTB and SFC have confirmed they do not plan to grant a “deeming arrangement” (grandfathering) to existing VA advisory or VA management service providers. The regimes will take full effect on the commencement date of the relevant statutory provisions.
The consequences of inaction are severe. The regulators have explicitly warned that providers who do not contact the SFC or the Hong Kong Monetary Authority (HKMA) for pre-application may suffer undue business disruptions, as they will have to stop operations on the commencement date. Firms must take appropriate steps as soon as possible to ensure proper transition, or wind down their VA management business in an orderly manner.
The silver lining: expedited fast track and early engagement
To mitigate market disruption, the SFC will introduce an expedited approval process for licensed corporations and registered institutions currently providing VA advisory and VA management services.
The regulators strongly encourage all industry stakeholders to reach out as soon as possible to initiate pre-application processes. Early engagement will allow firms to walk through the licensing process and help ensure their business models align with regulatory expectations.
Thematic inspections: the SFC’s escalating enforcement
This legislative overhaul does not exist in a vacuum; it coincides with an increasingly aggressive posture from the SFC regarding general asset management compliance. In October 2024, the SFC issued a circular flagging various deficiencies and substandard conduct identified during its supervision of licensed corporations managing private funds.
The SFC stated it will commence a thematic on-site inspection of asset managers managing private funds and will not hesitate to take decisive action against asset managers and their management, including Managers-In-Charge and Responsible Officers, for failures to discharge supervisory duties.
Because the new VA regimes operate on the “same activity, same risks, same regulation” principle, prospective VA managers must anticipate this exact level of scrutiny. Furthermore, VA management service providers who take a particular VA into custody on behalf of funds under their management (self-custody) will be subject to robust self-custody requirements.
So, what should asset managers do now?
The transition of VA advisory and management into the AMLO framework means that institutional-grade compliance and rigorous anti-money laundering controls are no longer optional. Instead, they are prerequisites for survival.
Stevenson, Wong & Co.’s Regulatory and Litigation practice is uniquely positioned to help your firm navigate this critical juncture. We routinely advise market-leading financial institutions, family offices, and virtual asset service providers on complex regulatory structuring and SFC enforcement matters.
Our team can assist you with:
- Pre-application strategy and SFC liaison: Initiating the pre-application dialogue with the SFC, ensuring your business model is structured optimally before formal submission.
- Regulatory gap analysis: Assessing your current operations — particularly for Type 9 managers caught by the removal of the de minimis threshold—against the new legislative requirements.
- Mock SFC inspections: Conducting rigorous, independent audits of your conflict of interest, risk management, and valuation frameworks to prepare your senior management for the SFC’s upcoming thematic on-site inspections.
- Compliance framework upgrades: Advising on institutional-grade AML/CFT policies tailored for digital assets, including protocols for blockchain analytics, wallet whitelisting, and robust transaction monitoring.
The window to secure a seamless transition is narrowing. Proactive engagement is the only viable strategy to protect your operations and capitalize on Hong Kong’s expanding digital asset ecosystem.
If you have any questions or would like to understand how these regulatory changes may impact your business or compliance obligations, please reach out to our Partner Kenneth Leung.
This article is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.