Where a digital-asset fund structured through Hong Kong and the CIS stands now

A digital-asset fund that spans Hong Kong and the Commonwealth of Independent States sits at an intersection that most single-jurisdiction advisers cannot read in full. The fund's licensing posture, its AML obligations, and the regulator that actually applies all depend on where the structural weight falls – and those decisions are being made, or revised, under regulatory pressure right now.

A digital-asset fund structured across Hong Kong and the CIS (the Commonwealth of Independent States, the multilateral grouping of former Soviet republics) carries concurrent regulatory obligations in two distinct legal environments: Hong Kong's mandatory virtual-asset trading platform licensing regime, which commenced 1 June 2023 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, and the increasingly formalised virtual-asset rules emerging across CIS jurisdictions, of which Kazakhstan and the UAE-adjacent Gulf corridor serve as the most developed regional reference points. The question is not whether the fund needs a structure – it almost certainly already has one – but whether that structure correctly places the licensing burden, the AML obligation, and the enforcement exposure.

This analysis sets out the commercial stakes, the governing instruments on both sides of the interface, a comparative read of the two regulatory environments, and our assessment of where the risk sits today. It is addressed to fund principals, general counsel, and compliance officers who are already operational or near-operational and need a clear second read on a position that is moving.

What is actually at stake commercially

The commercial case for a Hong Kong–CIS digital-asset fund structure is straightforward. Hong Kong offers a common-law system, a functioning securities and futures regulatory environment, direct institutional access to Greater China capital flows, and a licensing regime that gives regulated operators credibility with institutional counterparties in Asia and Europe. The CIS – particularly Kazakhstan, with its Astana International Financial Centre, and increasingly Georgia and Uzbekistan – offers lower operational cost bases, proximity to CIS-origin capital that cannot easily reach Hong Kong directly, and in some instances a more permissive initial licensing threshold for digital-asset activity.

The tension is equally straightforward. A fund that books activity through a CIS entity while relying on a Hong Kong regulated entity for its institutional credibility faces a regulatory gap the moment any question arises about which entity is actually conducting the regulated activity. Regulators in both environments are now asking that question with more precision than they were three years ago.

In our cross-border practice, we see two recurring commercial fact patterns. The first is a fund that established a CIS operational entity early – often in Kazakhstan or Georgia – for cost and capital-raising reasons, and then layered a Hong Kong entity on top without clearly allocating the licensing and AML obligations between them. The second is a fund that holds the Hong Kong virtual-asset trading platform licence as the centrepiece of its regulatory identity but conducts a material portion of its investment management and client-facing activity from a CIS office. Both patterns create exposure. Neither is unmanageable, but both require a clear structural read before the position hardens.

The stakes are not confined to regulatory fines. A misstated licensing position affects the fund's ability to bank, to onboard institutional investors, and – critically – to enforce contractual rights across the cross-border interface. A fund that cannot demonstrate clean regulatory standing in both environments is a fund that cannot close institutional rounds or defend its position before a counterparty dispute arises.

How does the governing framework apply across the two environments?

The Hong Kong licensing regime for virtual-asset activities is grounded in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which was amended to bring centralised virtual-asset trading platforms within a mandatory licensing regime administered by the Securities and Futures Commission. That regime commenced 1 June 2023. Where the virtual assets in question constitute "securities" or "futures contracts" within the meaning of the Securities and Futures Ordinance, the SFC's licensing requirements under that Ordinance apply concurrently. The result is a two-track licensing question that a fund touching both investment-grade digital assets and exchange-listed products must answer at inception, not after the fact.

The AML and counter-terrorist financing obligations for virtual-asset trading platforms in Hong Kong include customer due diligence requirements and compliance with the FATF travel rule for virtual-asset transfers. The travel rule – which requires originator and beneficiary information to accompany virtual-asset transfers above a defined threshold – applies to CIS-domiciled counterparties in precisely the same way it applies to any other cross-border transfer. That obligation is not adjusted by the fact that the CIS-side entity is part of the same group.

On the CIS side, the regulatory position is more heterogeneous. Kazakhstan's Astana International Financial Centre operates under a distinct legal regime modelled loosely on English common law, with its own financial-services perimeter and a digital-asset licensing framework that is more permissive at the threshold than Hong Kong's but has been tightening since 2022. Other CIS jurisdictions – Russia, Belarus, Uzbekistan, Georgia – operate under civil-law systems with their own emerging virtual-asset rules, none of which are yet fully integrated with international AML standards to the degree that Hong Kong requires of its counterparties. That discrepancy is where the cross-border compliance burden concentrates.

The critical point for a fund structured across both environments is that Hong Kong's regulatory obligations attach to the activity, not only to the entity. A CIS entity that routes orders through a Hong Kong-licensed entity, or that uses a Hong Kong entity's regulated status as the basis for its institutional marketing, may be drawing the Hong Kong regulator's scrutiny to the CIS entity's conduct. The clean separation that some fund structures assume to exist between the Hong Kong and CIS entities does not, under a substance-based regulatory analysis, exist in practice.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the allocation of activity between entities – which is where the regulatory risk is won or lost.

For a structured assessment of your fund's licensing and AML position across Hong Kong and the CIS, write to us at info@lockhartyip.com. Our desk covers the full cross-border interface, from Tech & Web3 licensing and AML compliance through to enforcement and counterparty dispute strategy.

The comparative read: Hong Kong versus the CIS regulatory environments

Hong Kong and the principal CIS digital-asset jurisdictions differ in three dimensions that matter most to a fund at the evaluation stage: regulatory maturity, AML integration, and enforcement certainty.

On regulatory maturity, Hong Kong's position is unambiguous. The SFC administers a licensing framework that was designed with institutional standards in mind. The licensing criteria, the ongoing conduct obligations, and the enforcement posture are all consistent with an environment that expects licensed operators to hold capital, manage conflicts, segregate client assets, and comply with AML requirements to FATF-standard. That maturity is precisely what gives a Hong Kong licence its institutional value. It is also what makes a licensing gap, or a mismatch between the entity holding the licence and the entity conducting the activity, a serious regulatory risk rather than a technical one.

The CIS presents a more varied picture. Kazakhstan's AIFC has made the most deliberate effort to align with international standards, and for a fund with genuine CIS-origin capital its licensing framework offers a credible first step. However, the AIFC's enforceability outside Kazakhstan – and specifically its enforceability against counterparties in the Mainland China or Hong Kong markets – is limited. A legal right that can be enforced only within the AIFC's perimeter is not the same as a legal right that can be enforced before the Hong Kong Court of First Instance or through the HKIAC arbitration process. That distinction matters when a counterparty dispute arises or when an investor seeks to exit.

On AML integration, the CIS jurisdictions sit at varying distances from the FATF standards that Hong Kong applies as baseline requirements. Russia and Belarus are currently subject to elevated international scrutiny that creates its own counterparty risk for a Hong Kong-licensed entity. A Hong Kong entity that maintains correspondent or flow relationships with those jurisdictions carries a compliance burden that must be actively managed and documented – not assumed away by the group's internal structure. We regularly advise on exactly this point: the internal structure of a group does not determine the AML analysis; the flow of funds and the nature of the relationship do.

On enforcement certainty, Hong Kong's common-law system provides a well-tested base. Awards made by the HKIAC and judgments of the Court of First Instance have defined enforcement routes across the Mainland and a growing number of other jurisdictions. CIS arbitration awards and court judgments have more limited enforcement reach, and the interaction between a CIS arbitration clause and a Hong Kong-seated dispute resolution process is a point that many fund agreements leave ambiguous. That ambiguity is expensive to resolve in a dispute.

Where the risk actually sits now: our read

The regulatory environment for digital-asset funds structured across Hong Kong and the CIS has shifted materially since the Hong Kong licensing regime commenced. The direction of travel is towards tighter substance requirements, stricter AML enforcement, and a more active regulator-to-regulator information-sharing posture. For a fund that assumed it could maintain a light-touch Hong Kong presence while conducting the bulk of its activity from a CIS base, that assumption is now a risk rather than a plan.

The first risk concentration is the substance question. A Hong Kong virtual-asset trading platform licence carries an implied requirement that the regulated activity is actually conducted through the Hong Kong entity. A fund that holds the licence but has its decision-making, its trading infrastructure, and its client-facing operations based in a CIS office is in a position that the SFC's conduct-based analysis may challenge. The remedy – bringing genuine substance to the Hong Kong entity – is available, but it requires action before the question is asked, not after.

The second risk concentration is the AML file. The FATF travel rule creates a documentation obligation that runs with every virtual-asset transfer above the applicable threshold. A fund that has been processing CIS-origin transfers without a systematic travel-rule compliance process has a gap in its AML file that a supervisory review or a correspondent bank's due-diligence inquiry will expose. The solution is a documented process, not a retrospective assertion that the transfers were compliant.

The third risk concentration is the enforcement assumption. Many CIS-facing fund agreements are governed by the law of a CIS jurisdiction or provide for dispute resolution before a CIS forum. For a fund that wants to enforce rights against a Mainland or Hong Kong counterparty, or that wants its investors to have a meaningful enforcement route, those agreement terms are a structural weakness. A fund agreement that routes disputes through a Hong Kong-seated arbitration, governed by Hong Kong law or the law of a neutral offshore jurisdiction, sits in a materially stronger enforcement position.

A fourth, increasingly relevant risk is the interaction between Hong Kong's sanctions posture and the CIS exposure. Hong Kong implements United Nations sanctions and does not give domestic effect to unilateral measures of other states. That is a clear and settled position. However, a fund with CIS-origin capital or CIS-based counterparties must maintain a current and documented assessment of its UN-sanctions exposure, and must manage its compliance file accordingly. The position is not that CIS exposure is impermissible – it is that it must be affirmatively managed, with documentation that demonstrates the fund's compliance analysis and the steps taken.

If an earlier filing, structure or regulatory engagement produced an adverse or stalled result, a second read can identify the structural error and the routes still open. For a preliminary read on your fund's cross-border position and the enforcement route, email info@lockhartyip.com. You may also find our analysis of comparable structuring questions in the fintech entity regulatory engagement briefing and the Hong Kong–UAE digital-asset fund analysis directly relevant.

What the structural options look like in practice

A fund structured across Hong Kong and the CIS has, in practice, three structural options once the regulatory analysis has been completed.

The first option is a Hong Kong-primary structure: the Hong Kong entity holds the virtual-asset trading platform licence, conducts the regulated activity with genuine substance in Hong Kong, and uses the CIS entity as a capital-introduction vehicle or as an operational base for non-regulated functions. This is the cleanest licensing position, and it is the structure that best supports institutional investor onboarding and enforcement credibility. Its constraint is the cost of maintaining genuine Hong Kong substance – people, systems, and decision-making authority – in the licensed entity.

The second option is a parallel-licensing structure: the fund maintains a Hong Kong licence for the regulated activity conducted in or towards Hong Kong-accessible markets, and a CIS licence – most likely an AIFC licence – for the regulated activity conducted in or towards the CIS market. The two entities are separately capitalised, separately staffed, and separately licensed. Their relationship is governed by intercompany agreements that clearly allocate the licensing and AML obligations. This structure is operationally heavier, but it is the structure that best reflects a fund with genuinely bifurcated investor bases and operating markets.

The third option is a single-jurisdiction consolidation: the fund simplifies its structure by consolidating regulated activity into one entity in one jurisdiction, and uses the other jurisdiction for non-regulated functions only. For a fund whose primary investors and counterparties are in the CIS, that may mean reducing the Hong Kong entity to a representative or advisory function with no regulated activity. For a fund whose primary institutional market is Hong Kong and Greater China, it may mean winding down the CIS entity's regulated activity. Neither option is inherently superior; the choice depends on where the fund's commercial centre of gravity actually sits.

A mid-market digital-asset fund with a CIS family-office investor base and a Hong Kong-licensed trading entity came to our desk in the latter part of 2026. The fund had been operating on the assumption that its CIS entity was merely an investor-relations vehicle. A regulatory review identified that the CIS entity was, in substance, taking investment decisions on behalf of the fund and routing them to the Hong Kong entity for execution – a pattern that exposed the Hong Kong entity's licence to a conduct question. We restructured the delegation and decision-making framework, documented the substance of the Hong Kong entity's role, and revised the fund's AML procedures to reflect the actual flow of funds. The fund's licensing position stabilised without any regulatory engagement being required.

In a separate matter, a technology-group treasury with CIS operations had established a Hong Kong-domiciled vehicle to hold its digital-asset treasury positions. The group's internal transfers between the CIS operating entity and the Hong Kong treasury vehicle were not being processed with travel-rule documentation. We designed and implemented a travel-rule compliance process for the group's internal transfer flows and documented the analysis supporting the CIS entity's counterparty status under Hong Kong's AML rules. The compliance file was subsequently accepted by the group's primary correspondent bank without further qualification.

Common structural errors that foreign advisers make

The most persistent error we see in CIS-to-Hong Kong digital-asset structures is the assumption that a Hong Kong licence is a jurisdictional safe harbour that extends to all entities in the group. It is not. The licence attaches to the entity that holds it, and the conduct obligations attach to the activity that entity conducts. A CIS entity that conducts regulated activity while a Hong Kong entity holds the licence is in a position that no amount of corporate structuring can resolve after the fact.

The second common error is treating the AIFC as equivalent to a Hong Kong-regulated environment for purposes of counterparty due diligence. An AIFC-licensed entity is not the same as an SFC-licensed entity for the purposes of a Hong Kong entity's AML obligations. The Hong Kong entity must conduct its own customer due diligence on the AIFC entity, regardless of the AIFC entity's own licensing status. That due diligence must be documented, current, and proportionate to the risk profile of the relationship.

The third error is drafting fund agreements with CIS-law governing law and CIS-forum dispute resolution on the assumption that the CIS forum will be acceptable to institutional investors. In our cross-border practice, institutional investors in the Hong Kong and Greater China market consistently require Hong Kong-seated arbitration or Hong Kong-court jurisdiction in fund documents. A fund agreement that cannot offer that forum is a fund agreement that will need to be amended before institutional close.

What should foreign advisers – and fund principals – take from this? The structural question is not whether Hong Kong or the CIS is the better jurisdiction. Both environments offer genuine regulatory and commercial value to a fund with a legitimate presence in both. The question is whether the structure accurately reflects where the regulated activity is conducted, where the AML obligation attaches, and where the enforcement route lies. Those three questions have specific, answerable answers – and the time to answer them is before the regulatory review, the investor due diligence, or the counterparty dispute makes the question unavoidable.

Where this is heading: the near-term regulatory direction

The direction of Hong Kong's regulatory posture towards digital-asset activities is towards greater institutional rigour, not towards relaxation. The VATP (virtual-asset trading platform) licensing regime is maturing. The HKMA's licensing regime for fiat-referenced stablecoin issuers (entities that issue digital tokens pegged to a fiat currency) commenced in 2025, and parties relying on that regime should verify the current commencement date and licensing perimeter before acting. The interaction between the VATP regime and the stablecoin regime creates a new set of questions for funds that hold stablecoin positions as part of their treasury management or that use stablecoins as a settlement mechanism in cross-border transactions.

On the CIS side, the regulatory direction is also towards tighter formalisation, though the pace and consistency vary significantly across jurisdictions. Kazakhstan's AIFC is the most advanced reference point, but even the AIFC's standards are moving towards closer alignment with FATF requirements, which will narrow the gap between AIFC-licensed and Hong Kong-licensed entities but will also increase the compliance burden on CIS-based operators. For a fund that chose a CIS domicile precisely because of its lighter-touch initial requirements, that tightening is a structural risk to model now rather than manage reactively later.

The most significant near-term development for cross-border structures is the increasing focus of AML supervisors – on both sides of the interface – on the actual flow of funds rather than the nominal corporate structure. A fund that can demonstrate clean, documented, travel-rule-compliant fund flows between its Hong Kong and CIS entities, with current customer due diligence on all counterparties and a clear licensing analysis, is a fund that can absorb a supervisory review. A fund that relies on a structural argument to explain why its CIS entity's activity does not attract its Hong Kong entity's AML obligations is a fund that will find that argument tested at the worst possible moment.

The objection handled: "we already have legal opinions from both jurisdictions"

The most common objection our desk encounters from fund principals who have structured across Hong Kong and the CIS is that they have already obtained legal opinions from counsel in both jurisdictions and that those opinions confirm the structure is sound. That comfort is less robust than it appears.

A legal opinion from a single-jurisdiction adviser in Hong Kong confirms the structure's compliance with Hong Kong law as at the date of the opinion, based on the facts presented to the advising counsel. It does not address whether the CIS entity's actual conduct – which the Hong Kong adviser may not have fully examined – creates a question under Hong Kong law. It does not address the interaction between the two licensing regimes. And it does not address the AML analysis as applied to the actual fund-flow pattern, which is a factual rather than a legal question until the moment a regulator or a bank examiner makes it both.

A cross-border analysis is not the same as the sum of two single-jurisdiction opinions. The interface between the two systems – the point at which Hong Kong regulatory obligations engage CIS activity, and vice versa – is precisely the area that single-jurisdiction advisers are structurally unable to address. That is the work our desk does, and it is the work that determines whether a fund's cross-border structure is genuinely sound or merely correctly documented in two separate places.

Related practices

• Sanctions & AML – cross-border AML compliance, counterparty due diligence, and sanctions-neutral contracting
• Holding Structures – fund and holding entity design across Hong Kong and principal offshore centres

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.