Update: a digital-asset fund structured Cayman

Two regulatory clocks are now running at once for managers of digital-asset funds that sit astride the Hong Kong–Cayman Islands corridor. The Securities and Futures Commission's mandatory virtual-asset trading platform licensing regime and the newer fiat-referenced stablecoin framework together create an interlocking compliance posture that a fund structured across both centres must address before it accepts capital or begins trading.

A digital-asset fund using a Hong Kong management entity and a Cayman Islands fund vehicle must hold – or confirm it does not require – a licence under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance before operating a centralised virtual-asset trading platform, with the Securities and Futures Commission as the licensing authority for that regime, effective 1 June 2023. Where the fund touches fiat-referenced stablecoins, the Hong Kong Monetary Authority's separate licensing perimeter introduced in 2025 must also be assessed. Parties should verify the current commencement date and precise perimeter of the stablecoin regime before acting.

This briefing covers what changed, who in the fund structure is affected, and the immediate steps.

What has changed – and when

The virtual-asset trading platform licensing regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance commenced on 1 June 2023. From that date, any person operating a centralised virtual-asset trading platform in Hong Kong, or actively marketing such services into Hong Kong, requires a licence from the Securities and Futures Commission.

That perimeter is now fully operative. The transitional period for previously operating platforms has passed. The Securities and Futures Commission has indicated active supervisory engagement with the sector. A management entity sitting in Hong Kong that directs trading activity – even where the fund vehicle is domiciled in the Cayman Islands – is exposed to the licensing test.

Separately, where the fund holds or deals in virtual assets that qualify as "securities" or "futures contracts" under the Securities and Futures Ordinance, the licensing obligations under that instrument apply in parallel. The two regimes are not mutually exclusive. Our desk regularly sees fund managers incorrectly assume that a Cayman domicile for the vehicle removes the Hong Kong licensing question entirely. It does not.

For funds touching fiat-referenced stablecoins, the Hong Kong Monetary Authority introduced a licensing regime for fiat-referenced stablecoin issuers in 2025. Managers should verify the current commencement date and the precise scope of the perimeter with current regulatory guidance before characterising any portfolio position.

Who it affects across the Hong Kong–Cayman corridor

The typical structure presents three pressure points. First, the Hong Kong management company – as the entity directing investment decisions and, in many cases, hosting or interfacing with the trading platform – carries the primary licensing exposure under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Second, the Cayman Islands fund vehicle itself is not licensed in Hong Kong, but its economic activity flows through the Hong Kong manager; the manager's status determines whether the consolidated structure is operating lawfully.

Third, the fund's AML and travel-rule obligations (requirements that identify the originator and beneficiary of virtual-asset transfers and pass that information along the transfer chain, reflecting Financial Action Task Force standards) attach to the platform operator in Hong Kong. A Cayman fund vehicle that transacts through an unlicensed or inadequately licenced Hong Kong entity inherits that exposure at the level of the investor relationship and the administrator.

Cross-border enforcement risk is real. The Securities and Futures Commission has powers to take action against persons operating without a required licence. Where the fund has investors, counterparties or service providers in multiple jurisdictions, an enforcement step in Hong Kong can affect the fund's standing and operations in the Cayman Islands as well. In our cross-border practice, the most common gap we identify is not a deliberate decision to operate unlicensed – it is an assumption that the structure, once set up, was assessed against rules that have since changed.

Immediate action for managers and their advisers

Three steps are immediate. First, map the fund's activity against the licensing perimeter: confirm whether the Hong Kong management entity operates, or causes to be operated, a centralised virtual-asset trading platform. If yes, confirm whether a licence has been obtained or whether an application is in progress. If neither, the exposure must be resolved before further activity.

Second, assess the Securities and Futures Ordinance overlay. If any portfolio asset meets the definition of "security" or "futures contract", additional licensing obligations apply. The two tests run side by side; satisfying one does not discharge the other.

Third, review customer due diligence files and the travel-rule compliance record. Virtual-asset trading platforms subject to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance are required to meet customer due diligence standards and to comply with travel-rule requirements on virtual-asset transfers. Fund administrators and prime brokers with a Cayman nexus should confirm that their information-transmission procedures meet the standard required by the Hong Kong manager's licence conditions.

For fund managers engaged in this review, we work alongside locally licensed Hong Kong firms on matters requiring Hong Kong law input. Our role covers the cross-border licensing posture, AML compliance file, and the structural interface between the Cayman vehicle and the Hong Kong management entity. See our overview of the Tech & Web3 practice for further context, and our guides on digital-asset fund structures through Hong Kong and Cyprus and on cross-border data agreements touching Singapore for related structural considerations.

To discuss the licensing and AML position for your digital-asset fund across Hong Kong and the Cayman Islands, write to us at info@lockhartyip.com.

Frequently asked questions

What is the first step in a digital-asset fund structured through Hong Kong and the Cayman Islands?

The first step is a licensing assessment of the Hong Kong management entity against the virtual-asset trading platform regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, with the Securities and Futures Commission as licensing authority. That assessment determines whether the fund is operating lawfully before capital is accepted or trading begins. A parallel check under the Securities and Futures Ordinance is required where any portfolio asset may constitute a "security" or "futures contract".

What does the route look like for a digital-asset fund structured through Hong Kong and the Cayman Islands?

The typical route involves establishing or confirming the licensing position of the Hong Kong manager, ensuring the Cayman fund vehicle's offering documents reflect the applicable regulatory position in Hong Kong, and building the AML and travel-rule compliance infrastructure to the standard required by the manager's licence conditions. The two centres serve distinct functions – Hong Kong as the management and regulatory nexus, the Cayman Islands as the fund domicile – and the compliance obligations flow from that division. Parties should verify the current position before acting.

What documents are needed for a digital-asset fund structured through Hong Kong and the Cayman Islands?

Core documents include the licensing application and supporting regulatory submissions for the Hong Kong management entity, the fund's constitutional documents and offering memorandum reflecting the Hong Kong regulatory position, customer due diligence policies and procedures meeting the Anti-Money Laundering and Counter-Terrorist Financing Ordinance standard, and a travel-rule compliance record for virtual-asset transfers. Where fiat-referenced stablecoins are in scope, additional documentation for the Hong Kong Monetary Authority's licensing regime will be required. Specific requirements should be confirmed against current regulatory guidance.

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

Update: a digital-asset fund structured through Hong Kong and the Cayman Islands

What has changed – and when

Who it affects across the Hong Kong–Cayman corridor

Immediate action for managers and their advisers

Frequently asked questions

Speak with Lockhart & Yip

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