Update: a digital-asset fund structured through Hong Kong and the United Kingdom

Digital-asset fund managers operating across the Hong Kong – United Kingdom corridor now face a dual licensing reality: Hong Kong's mandatory virtual-asset trading platform regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (the AML/CTF Ordinance) runs in parallel with the United Kingdom's financial-promotion and registration requirements for cryptoasset businesses. A structure that was compliant eighteen months ago may sit in a regulatory gap today.

The trigger is straightforward. Both jurisdictions tightened their perimeters at roughly the same time, yet the two regimes do not align on scope, timing or the obligations they impose on fund vehicles. A Hong Kong-domiciled general partner co-existing with a UK-registered management entity – or the reverse – calls for a live compliance review before the next investor communication or capital call goes out.

What changed and when

Hong Kong's virtual-asset trading platform licensing regime commenced on 1 June 2023 under the AML/CTF Ordinance. The Securities and Futures Commission is the licensing authority for centralised virtual-asset trading platforms. Where a digital asset meets the definition of a "security" or "futures contract" under the Securities and Futures Ordinance, a separate SFC licence is also required. Neither exemption nor grandfathering operates indefinitely; operators who have not yet filed or who rely on the transitional window should verify the current deadline with locally licensed counsel before acting.

In the United Kingdom, the Financial Conduct Authority's cryptoasset registration regime has been in effect for firms carrying on cryptoasset business, and the scope of the financial-promotion perimeter was extended to cover qualifying cryptoasset communications. The practical effect for a fund structured with a UK-facing vehicle: both the entity and its promotions may require registration or approval before distribution activity begins.

Where a fund vehicle sits in Hong Kong while the marketing function sits in the United Kingdom – a common arrangement for managers targeting European and Gulf capital – both sets of requirements apply simultaneously. Neither jurisdiction treats the other's licence as a substitute for its own.

Who this affects

The corridor matters most for three categories of manager. First, Asian managers with a UK feeder or UK-based placement agent. Second, UK-based digital-asset fund houses that have moved their principal fund entity or general partner to Hong Kong. Third, managers in either jurisdiction who are accepting capital from investors routed through the other, even passively.

AML obligations compound the issue. VATPs in Hong Kong are subject to customer due diligence obligations and the FATF travel rule (the requirement to transmit originator and beneficiary information with virtual-asset transfers). A UK-regulated equivalent faces analogous obligations under the UK's money-laundering regulations. Where the fund sits across both jurisdictions, the source-of-funds file must satisfy both sets of standards – and the two do not always reach the same conclusion on what sufficient documentation looks like.

Our desk regularly advises fund managers working precisely this corridor. The structural question – which entity holds which licence and in which order – shapes every investor communication, every transfer of assets, and every redemption.

What to do now

The immediate steps are not complex, but the sequencing matters.

• Map the fund's current entity structure against both regimes: which vehicles are in scope in Hong Kong, which are in scope in the United Kingdom, and where the marketing and transfer activity sits.
• Confirm whether the Hong Kong entity has filed for a VATP licence, and whether any virtual assets held by the fund fall within the SFC's securities perimeter.
• Review all investor-facing communications issued from or directed to the United Kingdom for compliance with the financial-promotion regime.
• Audit the AML and travel-rule file to verify it meets both Hong Kong and UK standards on source of funds and transfer-information requirements.
• If a UK entity communicates to or on behalf of the fund, check whether that entity itself requires FCA registration or a registered cryptoasset approver to issue financial promotions.

For fund managers who have not taken a cross-border licensing view since either regime commenced, the compliance gap may be wider than an internal review will reveal. We work alongside locally licensed firms on matters of Hong Kong law and with allied counsel in the United Kingdom, which means the analysis covers both legs of the structure in a single engagement rather than two separate instructions.

The contextual bridge here is worth stating plainly. A fund manager who has acted on one side of the corridor and not the other is not half-compliant. Under both regimes, the unlicensed or unregistered position may constitute a breach regardless of what has been done in the other jurisdiction.

For a structured assessment of your licensing and AML position across the Hong Kong – United Kingdom corridor, write to us at info@lockhartyip.com.

See also our overview of Tech & Web3 advisory services, our briefing on cross-border SaaS and data agreements touching the Cayman Islands, and our note on the virtual-asset trading platform licence in Hong Kong.

Speak with Lockhart & Yip

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