Where a digital-asset fund structured Singapore

The dual-hub model – a fund vehicle in Singapore, an operating or trading entity in Hong Kong – has become a default architecture for digital-asset managers in Asia. It looks tidy on a structure chart. In practice, it creates two parallel licensing tracks, two AML regimes, and two regulators who each claim a meaningful say over what happens inside the fund. The question principals and their general counsel are asking in our desk conversations is not whether to use both centres. It is how to manage the gap between them without producing a compliance failure in either.

A digital-asset fund structured through Hong Kong and Singapore operates under two distinct but partially overlapping regulatory regimes: Hong Kong's mandatory licensing regime for centralised virtual-asset trading platforms under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance – with the Securities and Futures Commission as licensing authority – alongside Singapore's digital payment token and capital markets licensing requirements under the Payment Services Act and the Securities and Futures Act, each administered by the Monetary Authority of Singapore. Which regime governs a particular activity turns on where the activity actually takes place, which counterparties are served, and how the fund's instruments are characterised – questions that rarely resolve cleanly when a fund straddles both systems.

This analysis covers the commercial stakes, the governing instruments on each side, the points at which the two systems produce real friction, and our read on where the risk is concentrating now.

What is actually at stake commercially for a dual-hub digital-asset fund?

A digital-asset fund using both Hong Kong and Singapore is almost never pursuing regulatory arbitrage in a naïve sense. The two centres offer genuinely different things. Hong Kong provides proximity to Mainland Chinese capital flows, a deep common-law court system, and a licensing regime that – since it commenced on 1 June 2023 – gives a licensed virtual-asset trading platform a form of regulatory legitimacy increasingly demanded by institutional limited partners. Singapore provides a longer track record of payment-services licensing, a different investor-origination universe, and a regulatory posture that has, at key moments, moved faster than Hong Kong on certain product categories.

The commercial stakes are therefore real. A fund that cannot satisfy both regulators risks losing its ability to trade or to onboard investors from one or both markets. An adverse finding in one jurisdiction can trigger a suitability concern in the other; regulators communicate. And in the digital-asset context, the time windows for remediation are shorter than in traditional finance – the asset class moves quickly, and a licensing gap of even a few months can close the window on a strategy entirely.

What we see in cross-border practice is that the commercial pressure to launch – or to continue operating – consistently runs ahead of the compliance architecture. The fund is live before the licensing sequence is complete. The entity structure reflects a tax or cost optimisation that was resolved before the regulatory characterisation was settled. Those mismatches are where enforcement risk accumulates.

How do the governing instruments in Hong Kong and Singapore actually work?

In Hong Kong, the primary instrument governing virtual-asset trading platform activity is the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, as amended to introduce the mandatory licensing regime for centralised virtual-asset trading platforms, with the Securities and Futures Commission as the competent authority. Where a virtual asset is characterised as a "security" or "futures contract" within the meaning of the Securities and Futures Ordinance, a separate SFC licence under that ordinance is also required. The two licensing tracks can and do apply simultaneously to the same entity.

The AML and customer due diligence obligations that attach to a licensed virtual-asset trading platform in Hong Kong are not merely procedural. They require a managed, documented framework that aligns with the FATF travel rule – meaning that virtual-asset transfers above a defined threshold must carry originator and beneficiary information. That requirement applies at the platform level, not just at the level of the fund manager sitting above it. A fund that operates its own trading infrastructure, or that routes orders through a related platform, needs to assess where the FATF travel rule obligation lands in its structure.

In Singapore, the principal instruments are the Payment Services Act – which licences digital payment token service providers – and the Securities and Futures Act, which governs fund management and the offering of capital markets products. The Monetary Authority of Singapore administers both. A fund manager investing in digital assets that constitute capital markets products will typically need a capital markets services licence or an exemption from it. A fund that additionally facilitates dealing in digital payment tokens – broadly, cryptocurrencies that are not securities – may need a payment institution licence or a major payment institution licence, depending on transaction volumes and the nature of the activity.

The structural overlap is this: the same instrument – a tokenised bond, a stablecoin-denominated unit, a basket of digital assets – can be characterised differently by each regulator. Hong Kong's SFC and Singapore's MAS do not maintain a joint characterisation register. A fund that holds an asset treated as a security in Hong Kong but as a digital payment token in Singapore will face two genuinely different compliance pathways for the same economic exposure. That divergence is not theoretical. It arises regularly when a fund's portfolio extends across asset types that sit at the margin of each regulatory perimeter.

Where does the cross-border interface between Hong Kong and Singapore produce the most friction?

Three interfaces generate the most friction in practice. The first is the licensing trigger. Hong Kong's mandatory licensing regime applies to any person operating a centralised virtual-asset trading platform and actively marketing their services to the Hong Kong public. Singapore's licensing regime triggers on the basis of where the activity is carried on and, in the capital markets context, where the offer is made. A fund structured with a Singapore general partner and a Hong Kong trading entity can simultaneously trigger the licensing requirements of both jurisdictions even if its principals believe the activity is contained within one. The test in each jurisdiction is activity-based, not entity-based, which is the single most common misconception we encounter.

The second friction point is AML documentation. Both Hong Kong and Singapore maintain FATF-aligned AML regimes. But their specific requirements for customer due diligence, beneficial ownership verification, and source-of-funds documentation differ in detail. A fund onboarding a limited partner who is a family office or a corporate vehicle from a third jurisdiction – the BVI, the Cayman Islands, or a Gulf centre – must satisfy each regime independently. The documentation that satisfies the Singapore MAS's expectations may not be sufficient for the SFC's review; the reverse is equally true. We regularly see funds that have prepared a single onboarding file that is almost adequate for both regulators – but not quite adequate for either.

The third friction point is enforcement coordination. Hong Kong and Singapore maintain a history of regulatory cooperation. If a fund comes to the attention of one regulator through a complaint, a suspicious transaction report, or a routine examination, there is a meaningful probability that the other regulator will be informed. A fund that treats its Singapore and Hong Kong operations as fully siloed – different counsel, different compliance officers, no unified oversight – discovers the error when a finding in one jurisdiction produces a letter from the other.

What does the comparative read tell us about licensing posture now?

Since the Hong Kong mandatory licensing regime commenced in June 2023, the SFC has moved progressively towards a posture of active examination of existing market participants. The initial period of the regime was characterised by a relative tolerance of transitional arrangements for platforms that had applied before the deadline and were awaiting determination. That period has shortened. The expectation from the SFC is now that platforms operating in Hong Kong should have either a licence or a pending application in good order, with a credible compliance function in place.

Singapore's trajectory has been different in tone. The MAS has at times been criticised – or credited, depending on one's perspective – with moving faster than peer regulators. Its approach to payment institution licensing has been well established for longer, and its capital markets framework has a more extended track record of applying to fund managers. But Singapore has also tightened its expectations around AML compliance significantly in recent years. The MAS has made clear that a digital payment token licence is not a light-touch arrangement; the AML and travel-rule obligations that attach to it are substantive.

The comparative read, from our cross-border practice, is that both regulators are now in an enforcement-active phase rather than a build-the-regime phase. The window in which a fund could operate on the basis of a pending application, a transitional exemption, or a good-faith read of an ambiguous characterisation question has narrowed substantially. That is the window-closing dynamic that makes the current moment consequential. A fund that has not resolved its licensing position in both jurisdictions is not in a comfortable holding position; it is accumulating regulatory exposure with each trading cycle.

The stablecoin question adds another dimension to this picture. The Hong Kong Monetary Authority's licensing regime for fiat-referenced stablecoin issuers commenced in 2025. A fund that holds, issues, or facilitates transfers of fiat-referenced stablecoins as part of its strategy needs to assess whether the HKMA regime applies to any entity in its structure. Parties should verify the current commencement date and the precise perimeter of the HKMA stablecoin regime before acting, as that regime was still in an early implementation phase as this analysis was prepared.

How does the characterisation of fund instruments affect the risk position?

Characterisation is the fault line running beneath every dual-hub fund structure. A digital-asset fund that holds a portfolio including tokenised equities, native cryptocurrencies, stablecoins, and structured digital instruments is operating across at least three different regulatory categories in each jurisdiction simultaneously. Those categories are not static. Both the SFC and the MAS issue guidance, impose conditions on licences, and update their positions on specific instrument types. A characterisation that was settled twelve months ago may not be settled today.

Consider a common pattern in our desk's experience: an Asian alternatives manager establishes a Cayman fund with a Singapore general partner and a Hong Kong investment manager entity. The fund invests in a diversified digital-asset portfolio. The Cayman vehicle issues units to institutional investors. The Hong Kong entity executes trades on centralised exchanges and, in some instances, operates proprietary execution infrastructure. The Singapore entity handles investor relations and co-invests through a parallel vehicle.

The question that requires immediate analysis in that structure is whether the Hong Kong entity – by operating execution infrastructure – is conducting activity that requires a virtual-asset trading platform licence from the SFC, in addition to whatever capital markets licence the fund management activity requires. If the answer is yes, and the licence is absent, the fund is in breach of the mandatory licensing regime from the first day of trading. The investment manager entity's capital markets licence does not cure the VATP licensing gap; they are separate requirements. That sequence of analysis is the one that foreign counsel – particularly US counsel who are accustomed to treating the broker-dealer and fund-manager licensing questions as largely discrete – most often miss.

The internal link between the VATP regime and the AML obligations is equally material. A full analysis of the Tech & Web3 practice area at Lockhart & Yip covers the licensing and AML framework in detail. The FATF travel rule, as it applies to virtual-asset transfers routed through a licensed platform, requires that originator and beneficiary information accompany transfers above the applicable threshold. A fund that uses its own infrastructure – or routes through a related entity – for settlement cannot treat that infrastructure as outside the travel rule simply because the end counterparties are other institutional funds. The analysis follows the transaction, not the label on the entity.

What foreign counsel and principals typically get wrong about the dual-hub model

The most persistent misconception is the entity/activity confusion noted above: the assumption that licensing is an entity-level question resolved by the jurisdiction of incorporation, rather than an activity-level question resolved by where and to whom the activity is directed. A Singapore-incorporated general partner is not inherently a Singapore-regulated entity; it is Singapore-regulated if and to the extent that it conducts regulated activity in Singapore. A Hong Kong-registered investment manager is not inherently subject to the VATP regime; it is subject to it if and to the extent that it operates a centralised virtual-asset trading platform. The question that must be asked first is: what does each entity actually do, and for whom?

The second misconception is that a single set of AML documentation – prepared to the higher of the two standards – will satisfy both regulators. In our experience, this works less often than it should, because the two regimes differ not just in threshold but in form. Hong Kong's AML guidelines specify particular expectations around source-of-funds documentation for corporate investors from specific jurisdictions. Singapore's equivalent guidance has different emphasis, different risk-appetite indicators, and different expectations for the treatment of politically exposed persons. A fund that has prepared a unified AML framework needs independent legal review against each jurisdiction's current guidance, not a comparison-shopping exercise for the higher standard.

The third error – less frequent but more serious when it occurs – is the assumption that regulatory exposure in one jurisdiction is ring-fenced from the other. The SFC and MAS cooperate. Enforcement actions in one centre are observable by the other. A regulatory finding that a fund manager was operating without a required licence in Hong Kong does not sit quietly in a Hong Kong regulatory file; it is the kind of matter that a Singapore-licensed entity affiliated with the same group will need to disclose or address. The cross-border element of the dual-hub model cuts both ways: it provides access to two markets, and it exposes the fund to enforcement attention from two regulators simultaneously.

A useful cross-reference for managers with technology-related contractual arrangements alongside the fund structure is our matter note on cross-border SaaS and data agreements, which addresses related questions of governing law, enforcement, and cross-border interface for digital-services arrangements.

Our view on where the risk is concentrating now

The risk is concentrating at three points. First, the VATP licensing gap in Hong Kong. Funds that routed trading activity through their investment manager entity on the assumption that it was analogous to a discretionary fund manager – and therefore did not require a platform licence – are in the most exposed position. The SFC's examination programme is active. The standard for what constitutes a centralised virtual-asset trading platform has been applied more broadly in SFC guidance than some early market readings suggested. Funds in this position should not be waiting for an examination to trigger the analysis.

Second, the AML travel-rule compliance gap for cross-jurisdictional transfers. A fund that transfers virtual assets between a Hong Kong entity and a Singapore entity – or between either entity and a third-party exchange or custodian – on a regular basis, without a documented, implemented travel-rule compliance programme, is accumulating suspicious transaction report exposure. The trigger for a suspicious transaction report in Hong Kong does not require knowledge of wrongdoing; it requires suspicion, and an AML examiner who finds an undocumented transfer programme will form suspicion quickly.

Third, the stablecoin characterisation question. If a fund holds or facilitates transfers of fiat-referenced stablecoins, it needs to assess both the HKMA stablecoin regime and the MAS regime for digital payment tokens. The two regimes are not co-extensive. A stablecoin that falls outside the HKMA perimeter may sit inside the MAS perimeter, or vice versa. Funds that have not run that analysis against their current portfolio are carrying an unquantified characterisation risk that may become acute as both regimes move into their enforcement phases.

For funds that have resolved their Hong Kong licensing position but have not yet completed the Singapore side of the analysis – or vice versa – this is the moment to close the gap. The window in which a fund can regularise its position without an enforcement trigger is narrower than it was in 2023. Regulators in both centres have stated publicly that they expect the market to have moved from awareness of the regimes to compliance with them.

Managers working through the related question of BVI-based holding structures above a Hong Kong fund entity will find further analysis in our guide to digital-asset fund structures through Hong Kong and the BVI.

The sequence above describes the standard analytical position. Your fund's actual risk profile turns on the documents, the activity each entity conducts, the counterparties it serves, and the characterisation of the instruments it holds. That is where the route through this terrain is won or lost.

For a structured assessment of your dual-hub fund's licensing and AML position across Hong Kong and Singapore, write to us at info@lockhartyip.com.

Where this is heading: the regulatory trajectory for dual-hub funds

Both the SFC and MAS have signalled a direction of travel that is, in practical terms, toward more prescriptive oversight, more active examination, and less tolerance for arrangements that predate the current licensing regimes but have not been updated to reflect them. The Hong Kong mandatory licensing regime is now past its initial commencement phase. The MAS's evolution of its payment services framework has similarly moved from institution-building to enforcement-readiness.

The areas of developing regulatory focus – visible in published guidance from both regulators, though the pace and emphasis differ – include the treatment of decentralised finance protocols that interact with licensed platforms, the custody standards applicable to institutional digital-asset funds, and the cross-border information-sharing arrangements that regulators are building to track virtual-asset flows across jurisdictions. A fund that is structured for today's regime without building in the structural flexibility to adapt to those developing areas is likely to face a second round of restructuring.

There is also a Mainland China dimension. The capital flows that make Hong Kong attractive as a digital-asset hub are, in part, connected to Greater China. The regulatory posture of the People's Republic on digital assets is not static, and the interface between the Hong Kong regime and Mainland regulatory expectations is an area of genuine uncertainty. A fund with Mainland-connected limited partners or counterparties needs to assess that interface separately from its Hong Kong and Singapore licensing positions. The two questions are related but not the same.

The practical implication for fund managers is that the dual-hub structure should be treated as a living arrangement, not a settled one. An annual regulatory review – covering the licensing position in both jurisdictions, the AML framework against current guidance, and the characterisation of portfolio instruments – is the minimum defensible standard for a fund operating in this environment.

If an earlier filing, licensing application, or compliance programme produced an incomplete or stalled result, a fresh cross-border analysis can identify the gaps and the routes still available. Email info@lockhartyip.com to discuss your position.

Related practices

Tech & Web3 – licensing, AML and regulatory structuring for digital-asset businesses across Hong Kong and offshore
Sanctions & AML – cross-border AML compliance, travel-rule implementation and source-of-funds documentation

Frequently asked questions

Which jurisdiction's law applies to a digital-asset fund structured through Hong Kong and Singapore?

There is no single answer: both jurisdictions' laws apply concurrently to the activities conducted within each. The governing instruments – the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the Securities and Futures Ordinance in Hong Kong; the Payment Services Act and the Securities and Futures Act in Singapore – each apply on an activity basis, not an entity-of-incorporation basis. A fund with entities in both centres will typically need to satisfy both regulatory regimes in parallel. Which regime governs a specific activity turns on where that activity is carried out, who the counterparties are, and how the instruments involved are characterised by each regulator.

How does the cross-border element affect a digital-asset fund structured through Hong Kong and Singapore?

The cross-border element creates three principal complications. First, the licensing trigger for each jurisdiction must be analysed independently: satisfying one does not satisfy the other, and the two licensing regimes are not co-extensive. Second, the AML and FATF travel-rule obligations apply separately under each regime, and a single set of documentation may not satisfy both. Third, the two regulators – the SFC and the MAS – cooperate and share information; an adverse finding or enforcement action in one centre is likely to be visible to the other. Managing the dual-hub structure effectively requires coordinated oversight across both regulatory environments, not independent management of each as a silo.

Do I need a Hong Kong adviser for a digital-asset fund structured through Hong Kong and Singapore?

Yes, for the Hong Kong side of the structure, and the reasons are practical rather than formal. The SFC's mandatory licensing regime for virtual-asset trading platforms, the characterisation questions under the Securities and Futures Ordinance, and the AML obligations under Hong Kong's Anti-Money Laundering and Counter-Terrorist Financing Ordinance are Hong Kong-law matters that require Hong Kong legal input. Singapore counsel can address the Singapore side, but the two analyses need to be coordinated – the gap between them is where the compliance risk sits. Cross-border counsel with experience across both systems can manage that coordination and identify the interfaces that neither jurisdiction-specific adviser will see on their own.

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

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