How to approach a digital-asset fund structured through Hong Kong and Singapore

Two regulators, two licensing regimes, and a fund structure that must satisfy both – that is the starting position for any group considering a digital-asset fund that spans Hong Kong and Singapore. The commercial appeal is clear: Hong Kong offers a mature common-law framework, direct connectivity to Mainland Chinese capital flows, and a developed virtual-asset licensing regime; Singapore brings a well-regarded financial-services jurisdiction and access to Southeast Asian institutional and family-office capital. Together, they form the most actively used dual-hub architecture in the Asia-Pacific digital-asset space.

A digital-asset fund structured across Hong Kong and Singapore requires a sequenced regulatory analysis in each jurisdiction before entity formation begins. The governing instruments are the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the Securities and Futures Ordinance in Hong Kong, and the Securities and Futures Act and the Payment Services Act in Singapore. The virtual-asset trading platform licensing regime in Hong Kong commenced on 1 June 2023; Singapore's digital-payment token and capital-markets licensing framework operates in parallel. Neither jurisdiction defers to the other, and a misstep in sequence can require costly restructuring at a late stage.

This guide walks through the decision the reader faces, the steps in order, the regulatory gate at each, the most common structural error, and a decision checklist at the close.

What decisions does a fund structurer actually face at the outset?

The first decision is not "Hong Kong or Singapore" – it is "what does the fund actually do, and which regulatory perimeter does each activity trigger?" A fund that holds and trades virtual assets sits in a different regulatory category from one that manages tokenised securities, and a fund that issues a fiat-referenced stablecoin as part of its strategy triggers a third set of rules entirely. Getting the activity characterisation right at the start determines everything that follows.

In Hong Kong, the Securities and Futures Commission (the SFC) draws the primary line. Where a virtual asset is a "security" or a "futures contract" within the meaning of the Securities and Futures Ordinance, the fund and its manager are in scope for SFC authorisation or licensing under that statute. Where the virtual asset falls outside that definition but is traded on a centralised exchange, the mandatory licensing regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance applies to the platform – though the fund manager's position under that regime also warrants careful analysis.

In Singapore, the same threshold question arises under the Securities and Futures Act. A fund investing in capital-markets products – which can include certain digital tokens – requires a licensed or exempt fund manager. Activity involving digital-payment tokens that are not capital-markets products falls under the Payment Services Act, where major payment institution licensing or an exemption may apply.

The cross-border element sharpens this decision. A fund structured with a Singapore-domiciled general partner and a Hong Kong-based investment manager is answerable to both regulatory bodies. The comfortable assumption – that one licence will satisfy both – is the most common and most expensive mistake in this space. We return to that point in the section on common errors.

Which entities are needed, and which jurisdiction dominates for each?

Most dual-hub digital-asset fund structures use a three-entity spine: a fund vehicle, a general partner or trustee, and an investment manager. Where the fund is an open-ended vehicle, a fourth entity – a custodian – is either a group entity or an appointed third party, and its regulatory position in each jurisdiction must be verified independently.

The fund vehicle is typically domiciled in a low-tax, common-law offshore jurisdiction – the Cayman Islands is the most frequently used, with the BVI as an alternative for smaller structures. Both jurisdictions operate economic-substance regimes (rules requiring that certain income-generating activities have genuine local presence), and both require the fund to comply with applicable local funds legislation. Neither requires a digital-asset-specific licence at the vehicle level, but each requires the vehicle's service providers to hold any applicable licence in their own jurisdiction.

The general partner or trustee is commonly incorporated in either Singapore or Hong Kong, depending on where the principals are based and where investor documentation is to be executed. This entity is often the most sensitive from a licensing standpoint: where it is deemed to be managing a collective investment scheme or operating a digital-payment token service, it may need its own licence or registered-fund status.

The investment manager – the entity that actually makes investment decisions – is the entity most likely to require licensing. In Hong Kong, a manager operating a Type 9 (asset management) regulated activity under the Securities and Futures Ordinance must be licensed by the SFC, subject to any applicable exemption. In Singapore, a manager of a venture capital fund or a fund with a small number of qualifying investors may qualify for an exemption from licensing under the Securities and Futures Act, but the exemption conditions are narrow and must be verified against the specific fund parameters.

The question of where the investment manager sits – Singapore, Hong Kong, or both – is the single most consequential structural decision. Moving the manager after launch is operationally disruptive and may trigger a change-of-control analysis under the relevant licensing statutes.

What is the correct sequence, and what is the gate at each step?

The sequence is: activity characterisation first; entity architecture second; regulatory engagement third; entity formation fourth. Many first-time structurers reverse steps two and three, forming entities before engaging the regulator. That approach creates a structure the regulator did not review and may require to be amended.

Step 1 – Activity characterisation. Map every activity the fund and its entities will conduct against the regulatory perimeters in both Hong Kong and Singapore. The output is a matrix: activity, jurisdiction, applicable statute, licence type required or exemption relied upon. This step is legal work; it is not an administrative formality.

Step 2 – Entity architecture. Once the regulatory perimeter is mapped, design the entity structure to satisfy both regulators simultaneously. Consider where each entity must be present, which entity holds each licence, and how the management-fee and carry flows interact with tax-substance requirements in both jurisdictions. A structure that is tax-efficient but requires a licensed activity to be conducted from an entity that cannot hold a licence in its jurisdiction is a failed structure.

The gate here is the AML and Know Your Customer (KYC) architecture. Both Hong Kong and Singapore require financial institutions and licensed entities to maintain customer due diligence and ongoing monitoring. The FATF travel rule (the international standard requiring that originator and beneficiary information accompany virtual-asset transfers) applies to virtual-asset service providers in both jurisdictions. A fund structure must build its operational procedures around travel-rule compliance before investor onboarding begins, not after.

Step 3 – Regulatory engagement. Engage the SFC in Hong Kong and the Monetary Authority of Singapore (the MAS) at a preliminary level before forming the key entities. Both regulators accept informal pre-licensing enquiries. Early engagement avoids the structural revisions that follow a formal application that reveals an unanticipated regulatory issue.

Step 4 – Entity formation. Form the entities in the sequence dictated by the licensing process. Where a Hong Kong SFC licence is required, the applicant entity must be incorporated before the application is lodged, but the applicant should not commit to a permanent corporate structure until the regulatory position is clear. Cayman and BVI vehicles can typically be formed quickly; the licensed entities in Hong Kong and Singapore take longer, and their formation must be coordinated with the licensing timeline.

Step 5 – Licensing applications. Lodge applications in the correct order and ensure that the responsible officers, licensed representatives, and compliance infrastructure are in place before submission. The SFC requires that each licensed corporation have at least two responsible officers for each regulated activity type; Singapore's MAS has its own fit-and-proper requirements for directors and representatives. Neither process is fast, and parallel applications in both jurisdictions require careful case-management.

Step 6 – AML policies and investor documentation. Finalise the AML, KYC, and source-of-funds policies before launching investor outreach. Both Hong Kong and Singapore require licensed entities to maintain written AML policies compliant with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the MAS's equivalent guidelines respectively. The offering documents – the private placement memorandum, the subscription agreement, and the limited-partnership or trust deed – must reflect the actual regulatory status of each entity. Mischaracterising the status of an unlicensed entity in investor documents is a compliance exposure in both jurisdictions simultaneously.

Step 7 – Ongoing compliance. Once the structure is live, compliance obligations are continuous. Both jurisdictions require periodic reporting to the regulator, annual audits, and ongoing monitoring of investors. Where the fund transacts in virtual assets, the travel-rule obligations require the fund's technology stack to capture and transmit transfer information in the required format. This is an operational matter, not purely a legal one, but its design is a legal responsibility.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured assessment of your fund architecture and regulatory position across Hong Kong and Singapore, write to us at info@lockhartyip.com.

How does the Hong Kong – Singapore interface actually operate in practice?

The two regulators do not formally coordinate their licensing decisions, and there is no mutual-recognition arrangement for digital-asset fund managers as at the date of this guide. A licence granted by the SFC does not carry automatic recognition before the MAS, and vice versa. Each application is assessed independently against the home jurisdiction's standards.

In practice, the dual-hub structure creates three pressure points that counsel regularly see. First, the allocation of investment-decision authority between the Hong Kong and Singapore entities affects which regulator has primary jurisdiction over the manager, and the allocation must be documented in the fund's constitutional documents and investment management agreement, not merely assumed from the principals' physical location. Second, where investors are onboarded in one jurisdiction but managed from the other, the question of whether the management activity "takes place" in both jurisdictions – and therefore requires licensing in both – requires a careful facts-and-circumstances analysis. Third, the deemed-nexus rules (rules that attribute an activity to a jurisdiction based on where its effects are felt, rather than where the act is performed) differ between the two legal systems, and a structure designed to confine its regulatory footprint to one jurisdiction may be characterised differently by the other.

A Singapore-based group with a Hong Kong sub-fund manager came to our desk in early 2027 with a structure that had been designed to limit the Hong Kong regulatory footprint to the sub-manager level. The investment management agreement had been drafted to vest all final investment authority in the Singapore entity. On review, the Hong Kong SFC's approach to "management functions" meant that the day-to-day activity conducted from the Hong Kong office triggered a Type 9 licensing requirement regardless of where contractual authority was vested. The agreement was revised before the licensing application was lodged. The matter resolved within one licence cycle.

This scenario illustrates the central cross-border risk: legal authority and regulatory attribution are not the same thing. A structure that transfers paper authority to Singapore while the Hong Kong team conducts substantive management will not, in the SFC's analysis, confine the regulatory obligation to Singapore.

What is the most common structural mistake, and how is it avoided?

The most common mistake is treating the two-jurisdiction structure as an opportunity for regulatory arbitrage – assuming that licensing in the more permissive jurisdiction will serve both. It does not. Both the SFC and the MAS apply their own nexus tests, and both have indicated a willingness to take enforcement action against unlicensed activity conducted from their jurisdiction even where a licence exists elsewhere.

A related error is deferring the AML architecture. Some fund structurers treat the AML and travel-rule obligations as an operational matter to be resolved after launch. The SFC and MAS both treat AML compliance as a licensing threshold condition. An applicant that cannot demonstrate a functioning AML programme at the time of application will not receive a licence, and retrofitting an AML programme after investor onboarding has begun is operationally and legally difficult.

A third error is the stablecoin assumption. A fund that proposes to use a fiat-referenced stablecoin as a settlement instrument – whether issued internally or by a third party – must analyse whether the stablecoin triggers the Hong Kong Monetary Authority's licensing regime for fiat-referenced stablecoin issuers, which commenced in 2025. The perimeter of that regime covers issuers; the question of whether a fund that uses but does not issue a stablecoin is also in scope requires a fact-specific analysis. Parties should verify the current position with the HKMA before finalising the fund's settlement architecture.

The avoidance path is consistent: front-load the regulatory analysis, engage both regulators early, and build the AML and compliance architecture before the entity structure is fixed, not after.

If an earlier filing, structure or engagement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com to discuss the position.

How does this interact with the tax and substance position across both jurisdictions?

A dual-hub structure creates a substance and tax-residence question that must be addressed in parallel with the regulatory analysis. Hong Kong taxes on a territorial basis: profits tax applies to Hong Kong-sourced profits only, with 8.25% on the first HK$2,000,000 of assessable profits and 16.5% above that threshold under the two-tier regime. There is no capital-gains tax and no withholding tax on dividends. The foreign-sourced income exemption regime, in force from 1 January 2023, introduces economic-substance conditions for certain passive income – including dividends and interest – that a Hong Kong entity receives from offshore. A fund management company in Hong Kong that receives management fees from a Cayman fund must ensure that its activities constitute genuine Hong Kong-source income, which in practice means that the substantive management decisions are made in Hong Kong.

Singapore has its own suite of fund-tax incentives for qualifying funds managed by Singapore-based managers, but those incentives carry their own conditions and are outside the scope of this guide. The interaction between the Hong Kong and Singapore tax positions – particularly where a management fee is paid to one entity and a performance fee to another – requires a consolidated analysis. For groups within the scope of the OECD Pillar Two regime (consolidated revenue at or above EUR 750 million), the Hong Kong minimum top-up tax and income-inclusion rule, effective for fiscal years beginning on or after 1 January 2025, adds a further layer.

The practical point is that the tax analysis must be conducted as part of the structural design phase, not as an afterthought. A structure that satisfies both regulators but creates an unintended permanent establishment in one jurisdiction – or fails the substance test under the foreign-sourced income exemption regime – has exchanged one problem for another.

Our Tax Positions practice regularly maps the interaction between the licensing and substance positions for cross-border fund structures. See our guidance on regulatory engagement for fintech entities in Hong Kong for the parallel analysis on the licensing side.

Decision checklist for a dual-hub digital-asset fund

The following checklist distils the sequence above into the threshold questions a fund structurer should be able to answer before committing to the dual-hub architecture. It is not exhaustive; it identifies the gates that, if missed, require the most costly revision.

• Has the fund's activity been characterised against the regulatory perimeters of both the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong, and the Securities and Futures Act and the Payment Services Act in Singapore?
• Has the entity that will conduct each regulated activity been identified, and does that entity's intended jurisdiction of incorporation permit it to hold the required licence?
• Has the allocation of investment-decision authority between the Hong Kong and Singapore entities been documented in the constitutional documents and investment management agreement – not merely assumed from the principals' location?
• Has the AML and travel-rule architecture been designed and, where possible, tested before the licensing applications are lodged?
• Has preliminary engagement with the SFC and the MAS been scheduled before entity formation is finalised?
• If a stablecoin is used in the settlement architecture, has the HKMA's fiat-referenced stablecoin issuer licensing regime been assessed for applicability?
• Has the tax and substance position across both jurisdictions been analysed, including the foreign-sourced income exemption conditions and, where applicable, the Pillar Two position?
• Do the offering documents accurately describe the regulatory status of each entity as licensed, exempt, or pending?

A "no" answer to any of the above indicates an open structural risk. Parties should resolve each question before investor onboarding begins.

For more on the broader licensing and regulatory-engagement questions that arise in this space, see our Tech & Web3 practice overview and our related guide on cross-border data and SaaS agreements touching Singapore, which addresses the data-governance interface that some digital-asset platforms also need to manage.

Related practices

• Tax Positions – substance, FSIE and Pillar Two analysis for cross-border fund structures
• Sanctions & AML – AML programme design, travel-rule compliance and counterparty due diligence

Speak with Lockhart & Yip

For a scoped view of your matter, contact info@lockhartyip.com. Discuss your matter →

Related

• Tech Web3
• Cross Border Saas Or Data Agreement Touching Singapore 4
• Fintech Entity Regulatory Engagement Hong Kong Briefing 2

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