Update: a stablecoin or digital-asset custody

Hong Kong's regulatory regime for stablecoins and digital-asset custody is closing in on defined licensing perimeters in 2025, placing immediate compliance obligations on entities that issue, hold, or facilitate fiat-referenced digital assets. The governing instruments are the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which anchors the virtual-asset trading platform (VATP) licensing regime, and the Hong Kong Monetary Authority's licensing framework for fiat-referenced stablecoin (FRS) issuers. Entities that operate within either perimeter and have not mapped their structure against the current requirements carry a live window-closing risk.

What has changed – and when does it apply?

The VATP mandatory licensing regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance commenced 1 June 2023. The Securities and Futures Commission (SFC) is the licensing authority. Every centralised virtual-asset trading platform serving Hong Kong clients is, in principle, within scope. Where a virtual asset meets the statutory definition of a "security" or "futures contract", additional licensing under the Securities and Futures Ordinance applies in parallel. That dual-track exposure surprises principals who treat digital assets as a single category.

The Hong Kong Monetary Authority's licensing regime for fiat-referenced stablecoin issuers commenced in 2025. Parties should verify the current commencement date and the exact perimeter before relying on it. What is already clear is the direction: any entity issuing a Hong Kong dollar-referenced or other fiat-referenced token for use in commerce or settlement – whether from a Hong Kong base or cross-border – must engage with the HKMA regime before the window closes on unregulated operation.

Custody arrangements sit at the intersection of both tracks. A custody provider that holds virtual assets on behalf of clients in Hong Kong may fall within the VATP perimeter even if it does not operate a trading function. The relevant question is whether the entity's activity constitutes operating a virtual-asset trading platform under the ordinance. That question turns on structure and conduct – not on how the entity labels itself.

Who is affected across the corridor?

Exposure runs across a familiar corridor. Hong Kong-incorporated entities with custody or issuance functions face a direct VATP or FRS licensing obligation. Offshore holding structures – typically BVI or Cayman – used above a Hong Kong operating entity do not insulate the operating entity from the licensing requirement. The regulator looks at where the activity occurs and where clients are served.

Cross-border arrangements add a layer. A group that issues a fiat-referenced stablecoin from a Mainland China-adjacent operating base, settles through a Hong Kong account, and distributes to international users will engage both the HKMA FRS regime and, depending on the asset classification, the SFC's licensing track. The travel rule (the FATF standard requiring originator and beneficiary information to accompany virtual-asset transfers) applies to VATPs under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and adds a data-handling dimension to every custody instruction.

In our cross-border practice, we see two recurring profiles: international issuers using Hong Kong as a base for regulated stablecoin operations pointing at Asian markets, and existing financial groups – asset managers, payment providers, family offices – adding a custody or settlement layer and underestimating the licensing perimeter it creates. Both need a licensing assessment before structure or documentation is finalised.

For a structured read on how the VATP and FRS regimes interact with your existing or proposed structure, see our Tech & Web3 practice overview and the related analysis on virtual-asset trading platform licensing in Hong Kong.

The immediate action

Three steps apply now. First, map the entity's activity against the VATP perimeter under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. The question is not whether the entity is a "trading platform" in a colloquial sense – it is whether the regulated activity definition is engaged. Second, identify whether any token in the structure is a fiat-referenced stablecoin. If so, the HKMA FRS licensing position must be assessed separately and promptly. Third, review the AML and travel-rule position. Customer due-diligence obligations and transfer-information requirements under the ordinance apply from the point the licensing perimeter is engaged – not from the point a licence is granted.

For further background on how token-classification decisions interact with Hong Kong's licensing regime, see our briefing on token issuance reviewed under Hong Kong's regime.

The contextual bridge here is plain: entities that have already filed, structured, or begun operations may find that the applicable perimeter has shifted since their initial assessment. A second read can identify gaps and the routes still open.

To discuss how the stablecoin or digital-asset custody licensing position applies to your cross-border structure, contact us at info@lockhartyip.com.

Frequently asked questions

What is the first step in a stablecoin or digital-asset custody arrangement?

The first step is a regulatory-perimeter assessment under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to determine whether the entity's proposed activity engages the VATP licensing requirement administered by the Securities and Futures Commission. Where a fiat-referenced stablecoin is involved, the HKMA licensing position must be mapped at the same stage. Both assessments must precede any structural or documentation decisions.

How does the cross-border element affect a stablecoin or digital-asset custody arrangement?

A cross-border arrangement – for example, an issuance entity sitting offshore with a Hong Kong settlement or distribution function – does not displace Hong Kong's regulatory perimeter. The SFC and HKMA apply an activity-based test. Where Hong Kong clients are served or the regulated activity occurs in Hong Kong, the licensing obligation follows regardless of where the group's holding structure is domiciled. Mainland China-adjacent operations add a further cross-border compliance layer that must be addressed separately.

What are the main risks in a stablecoin or digital-asset custody arrangement?

The main risks are operating without a licence in a mandatory licensing regime, misclassifying a fiat-referenced token and inadvertently engaging the HKMA perimeter, and underestimating travel-rule and AML obligations that arise alongside the licensing requirement. Groups that structure custody or issuance functions without a current perimeter assessment face enforcement exposure and potential disruption to their commercial arrangements at a time when the regulatory window for orderly engagement is open but narrowing.

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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 stablecoin or digital-asset custody arrangement

What has changed – and when does it apply?

Who is affected across the corridor?

The immediate action

Frequently asked questions

Speak with Lockhart & Yip

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