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Updated Guidance on Virtual Asset-Related Activities in a joint circular issued by Regulators

With an increasing interest of investors in virtual assets and therefore an increasing number of enquiries of financial intermediaries about the distribution of virtual-asset related products to investors, the Securities and Futures Commission (“SFC”) and the Hong Kong Monetary Authority (“HKMA”) issued a joint circular on intermediaries’ virtual asset-related activities (“VA-related activities”) on 28th January 2022 (“Circular”).

Virtual assets refer to digital representations of value which may be in the form of digital tokens (such as utility tokens, stablecoins or security- or asset-backed tokens) or any other virtual commodities, crypto assets or other assets of essentially the same nature, irrespective of whether or not they amount to “securities” or “futures contracts” as defined under the Securities and Futures Ordinance.

The key points of the circular are set out below.

Distribution of Virtual Asset-Related Products

Although virtual asset-related products (“VA-related products”) are becoming popular, the SFC and the HKMA have taken into account that the global regulatory landscape of VA-related products is uneven, and that a retail investor is not likely to understand the risks involved in investing in VA-related products. Therefore distribution restrictions are imposed on the intermediaries such as the following:-

  • VA-related products which are considered complex products can only be offered to professional investors.

  • Except for institutional professional investors and qualified corporate professional investors, intermediaries should assess whether the client have sufficient knowledge of investing in VA-related products prior to effecting a transaction.

Provision of Virtual Assets Dealing Services

The majority of virtual assets trading platforms in Hong Kong are currently regulated only for the purposes of anti-money laundering and combating the financing of terrorism. As these protective measures may not be enough for protecting investors who may be at risk of suffering losses without recourse, the SFC and the HKMA consider that it is appropriate to require intermediaries to only partner with SFC-licenced virtual assets trading platforms for the provision of virtual assets dealing services (“VA dealing services”).

Intermediaries when providing VA dealing services, whether or not the virtual assets involved are securities, are expected to comply with the regulatory requirements of the SFC and the HKMA. And VA dealing services should only be provided to the intermediaries’ existing clients to which they provide services in Type 1 regulated activities (that is, dealing in securities).

For discretionary account management services, the intermediary even if authorised by its clients to provide VA dealing services on a discretionary basis should only invest less than 10% of the gross asset value of the client’s portfolio in virtual assets.

Provision of VirtualAsset Advisory Services

  • Intermediaries are expected to comply with all the regulatory requirements of the SFC and the HKMA when providing virtual asset advisory service (“VA advisory service”), whatever the nature of the virtual assets.

  • Such advisory service should only be provided to existing clients to which the intermediaries currently provides services in Type 1 or Type 4 regulated activities (that is, dealing in securities advising on securities).

  • Intermediaries should also offer VA advisory service to professional investors only, and test the professional investor’s virtual asset knowledge before providing such service.


Full implementation of the Circular will not take place till July 2022 so as to give the intermediaries 6 months to update their systems and controls for complying with the Circular.

Ms. Jean Wong

This article is written by a licensed lawyer in Hong Kong, member of our international network. The content of this article does not constitute legal advice, but has an informative function. For tailor made legal advice, contact the firm by e-mail to: or by phone +39 06 916505710. © Dong & Partners International Law Firm, All rights reserved.

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