The virtual asset regulatory landscape in Hong Kong entered a pivotal new phase on June 1. Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), any platform offering virtual asset services without an official license from the Hong Kong government is now prohibited from operating in the region. As one of the first two fully licensed virtual asset exchanges—alongside OSL—HashKey has emerged as a key player in this evolving market.
In a recent interview with the Financial Times, HashKey CEO Owen Wong shared insights into the regulatory journey, emphasizing that the cost of applying for a Hong Kong crypto exchange license is "not as high as imagined." His comments come at a time when the industry is navigating a major shift, with unlicensed platforms facing increasing pressure to either comply or exit.
A Clear Regulatory Path Forward
According to the Securities and Futures Commission (SFC), only two platforms have received full Virtual Asset Service Provider (VASP) licenses so far. Eleven others are under the "pending approval" category, signaling progress but also highlighting the rigorous standards in place.
Wong noted that while some startups may hesitate or withdraw due to compliance demands, Hong Kong’s clear regulatory framework now offers a defined path forward—something previously missing during the earlier “trial-and-error” phase. This clarity, he said, marks a transition from cautious exploration to active development in the region’s Web3 and digital asset ecosystem.
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The SFC's strategy, according to Wong, is designed to empower trusted financial institutions to lead in this new sector. By setting strong risk management standards, regulators are fostering a secure environment where traditional finance and digital assets can converge—a move critical for institutional adoption.
Strategic Vision: Bridging Traditional Finance and Web3
Looking ahead, Wong outlined several key areas where Hong Kong could drive innovation:
- Listing more mainstream cryptocurrencies to expand investment options
- Introducing low-risk derivatives to meet diverse investor needs
- Launching Ethereum-based staking ETFs, offering yield-generating opportunities
- Lowering entry barriers for traditional financial institutions
These steps aim to accelerate the integration of Web3 technologies into the mainstream financial system, positioning Hong Kong as a global hub for responsible innovation.
HashKey, already serving both local and overseas Chinese-speaking clients, reports over $500 million in user assets and significant year-to-date growth in new registrations. With unlicensed competitors expected to scale back or exit, Wong anticipates that displaced users will migrate toward regulated platforms—creating a major opportunity for licensed players.
Understanding the True Cost of Licensing
One of the most pressing questions for aspiring operators is cost. Wong clarified that while total investment across HashKey’s operations reaches tens of millions of U.S. dollars, the actual cost to apply for a license is substantially lower—measured in tens of millions of Hong Kong dollars, not U.S. dollars.
He emphasized a crucial distinction:
"The cost of preparing documentation and meeting compliance requirements during the application phase is different from ongoing operational expenses."
For platforms already in operation like HashKey, cumulative investments include technology infrastructure, security systems, compliance staffing, and market expansion. However, for new entrants still in the licensing stage, initial outlays focus primarily on legal structuring, audit readiness, AML/KYC frameworks, and system audits—significant but manageable costs for well-funded firms.
This clarification helps demystify entry barriers and encourages serious players to pursue licensing rather than operate in gray zones.
Market Potential Amid Regulatory Shifts
Despite being among the top 10 exchanges on CoinGecko (ranked #7 on June 2), HashKey operates in a market still largely dominated by unregulated offshore platforms. Yet, data suggests a turning point.
Recent figures show:
- Weekly new customer sign-ups up over 267% year-on-year
- Active user growth more than tripled
- Total trading volume exceeding HK$44 billion
- User assets surpassing $500 million
As enforcement tightens, unlicensed platforms face a stark choice: obtain a license or exit Hong Kong. This regulatory shakeout clears space for compliant exchanges to capture market share and build trust with retail and institutional investors alike.
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Building a Sustainable Ecosystem
Wong also addressed concerns about market saturation. While demand is rising, he cautioned against issuing too many licenses too quickly—a scenario he likened to historical power struggles such as the “Nine Sons Competing for the Throne.” Too many players could undermine stability and consumer protection.
Instead, licensing should be paced according to market capacity and investor demand, ensuring quality over quantity. With crypto markets showing signs of recovery in 2025, Wong expects increased interest from global institutions seeking entry through Hong Kong’s regulated gateway.
FAQ: Your Questions Answered
Q: What does it mean to be a licensed virtual asset service provider in Hong Kong?
A: A licensed VASP meets strict SFC requirements around capital adequacy, cybersecurity, anti-money laundering controls, and investor protection—ensuring safe and transparent trading.
Q: Can unlicensed platforms still serve Hong Kong users?
A: No. As of June 1, 2025, all virtual asset exchanges must hold an SFC license or cease operations targeting Hong Kong residents.
Q: How long does it take to get a crypto exchange license in Hong Kong?
A: The process typically takes 6 to 12 months, depending on application completeness and regulatory review timelines.
Q: Are staking services allowed under the new rules?
A: Yes, licensed platforms can offer staking products, including plans tied to ETFs and proof-of-stake blockchains like Ethereum.
Q: Is Hong Kong becoming a crypto hub again?
A: With clear regulations, tax incentives, and support for innovation, Hong Kong is repositioning itself as Asia’s leading center for compliant digital asset activity.
Q: Will retail investors have access to crypto ETFs?
A: Yes. The SFC has approved spot Bitcoin ETFs, and Ethereum staking ETFs are expected soon—both available through licensed brokers and exchanges.
Final Outlook: Stability Meets Innovation
Hong Kong’s approach balances innovation with investor protection. By setting high standards and supporting pioneers like HashKey, the city is laying the groundwork for sustainable growth in digital finance.
For new entrants, the message is clear: compliance isn’t just mandatory—it’s competitive advantage. And for users, the shift means safer access to next-generation financial tools.
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As the market evolves, licensed exchanges will play a central role in connecting global capital with blockchain innovation—all within a trusted regulatory framework.
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