Response to Further Consultation on Virtual Asset Advisory Service Providers and Virtual Asset Management Service Providers
Release Date: 2026-01-20
| Division 5, Financial Services Branch | |
| Financial Services and the Treasury Bureau, | vadealing-consult@fstb.gov.hk |
| 24/F, Central Government Offices, | |
| 2 Tim Mei Avenue, Tamar, | |
| Hong Kong |
20 January, 2026
Response to Further Consultation on Virtual Asset Advisory Service Providers and Virtual Asset Management Service Providers
Q1: Do you agree with the proposed definition and scope of VA advisory services?
Response:
Yes, in principle, we agree with aligning the definition with the existing Type 4 regulated activity under the SFO. This consistency aids market understanding.
However, SFC may provide specific guidance distinguishing between “VA Advisory” and “Market Commentary.” As noted in the analysis of the landscape, the crypto ecosystem is heavily driven by KOLs and social media influencers. There is a risk that licensed professionals will be subject to strict compliance costs, while unlicensed influencers providing “trading signals” (which effectively function as advice) operate with impunity on offshore platforms. The definition must be robust enough to capture those who monetize specific investment recommendations, regardless of the medium used.
Q2: Are there any other exemptions which may be appropriate?
Response:
We agree with retaining the statutory exemptions found in the SFO (e.g., intragroup advice, advice incidental to other licensed activities).
We suggest considering an exemption for “Technological Service Providers.” Companies that provide purely data-driven analytics (e.g., on-chain metrics, “whale” alerts) without offering subjective buy/sell recommendations should be explicitly exempted to prevent stifling the local RegTech and data analytics sector.
Q3: Do you have any comments on the regulatory requirements to be imposed on VA advisory service providers?
Response:
We generally agree with aligning requirements (Financial Resources, AML/CFT) with the SFO regime. We would like to highlight the practical challenge of Professional Indemnity Insurance (PII). Currently, few insurers cover VA-related advisory risks. If PII is a mandatory licensing condition, the SFC must ensure such products are actually available in the market, or otherwise accept a higher liquid capital buffer in lieu of insurance during the initial implementation phase.
Q4: Do you agree with the proposed definition and scope of VA management services?
Response:
We disagree with the scope regarding the removal of the de minimis threshold.
The proposal removes the existing “10% Gross Asset Value” threshold that currently applies to Type 9 managers. This implies that a traditional stock portfolio manager who allocates even 1% of the fund to Bitcoin for diversification would require a full VA Management license.
This “all-or-nothing” approach is disproportionate. It will discourage traditional asset managers from exploring the asset class and contradicts the government's goal of integrating Web3 with traditional finance. It imposes a heavy compliance burden for negligible risk exposure.
Q5: Are there any other exemptions which may be appropriate?
Response:
Yes. We strongly propose reinstating a de minimis exemption.
Following up the previous question, we recommend that Type 9 licensed corporations managing portfolios with less than a specific threshold of VAs (e.g., 10% of GAV) should be exempt from the full VA Management licensing regime, perhaps subject only to a notification requirement. This aligns with the risk-based approach and facilitates gradual institutional adoption.
Q6: Do you have any comments on the requirements relating to VA management?
Response:
We request clarity on “Best Execution” standards. Given that liquidity for VAs is fragmented globally, managers must be permitted to execute trades on venues that offer the best price, even if those venues are not SFC-licensed VATPs, provided the manager conducts sufficient due diligence. Restricting execution solely to local platforms (which may have lower liquidity) would harm the investors' interests.
Q7: Should VA management service providers be required to hold VAs of the private funds they manage via SFC-regulated VA custodians?
Response:
No. We strongly advocate for flexibility regarding custody arrangements for private funds.
Mandating the use of SFC-regulated custodians for all VA funds is impractical for two reasons:
- Asset Support: SFC-licensed custodians generally support a limited list of large-cap tokens. Private Equity and Venture Capital (PE/VC) funds invest in early-stage tokens that local custodians do not yet support. A strict mandate would effectively ban local managers from running Web3 VC funds.
- Risk Diversification: Institutional investors often require diversified custody arrangements (including offshore qualified custodians) to mitigate counterparty risk.
We support the SFC’s consideration to allow self-custody for PE/VC funds (up to a threshold) and the use of qualified offshore custodians (e.g., those regulated in the US, Japan, or Singapore) for private funds serving professional investors.
Q8: Do you have any comments on the licensing or registration application fee and annual fee for a licensee or registrant providing VA advisory services or VA management services?
Response:
Fees should be commensurate with those charged for Type 4 and Type 9 regulated activities under the SFO. We oppose any “premium” pricing for VA licenses, as the compliance costs for these firms (e.g., blockchain analytics tools, specialized audits) are already significantly higher than for traditional firms.
Q9: Do you have any other comments on the VA advisory and VA management service providers licensing regimes?
Response:
Transitional Arrangements (“Hard Start”). We are deeply concerned by the lack of a “deeming arrangement” (grace period). The proposal suggests that existing managers must be licensed by the commencement date or cease business.
Given the complexity of the application process and potential bottlenecks at the SFC, a “hard start” creates immense business continuity risk. Legitimate businesses may be forced to suspend operations while awaiting approval. We strongly urge the government to implement a 6 to 12-month deeming period for existing practitioners who submit their applications prior to the commencement date.
If you have any queries, please feel free to contact Officer, Dr. Ricky Yeung ( / ) or contact me ( / ).
Yours sincerely,
【Signature】【Chop】
Mofiz Chan
Chairman
Hong Kong Securities & Futures Professionals Association
1/F, Siu Ying Commercial Building, 151-155 Queen's Road Central.
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