A practical guide to a digital-asset fund UAE

Two regulators. Two licensing regimes. One fund. The decision a principal faces when structuring a digital-asset fund across Hong Kong and the UAE is not simply where to incorporate – it is which regulatory gate opens first, and whether the sequence holds under both regimes simultaneously. Get the order wrong and the fund may be licensed in one centre while inadvertently breaching a threshold in the other.

A digital-asset fund structured through Hong Kong and the UAE requires a deliberate two-track approach: the Hong Kong leg sits under the Securities and Futures Commission (SFC) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, while the UAE leg engages a separate virtual-asset regulatory regime with its own licensing perimeter, substance requirements and AML obligations. The governing instruments in both centres must be satisfied in sequence, and the cross-border interface – where assets, investors and management functions sit – determines which regulator applies to which activity. This guide sets out the decision points, the sequence, the common mistakes and a short checklist for principals at the outset.

The sections below move in order: the decision first, then the structure options, then the step-by-step sequence with the gate at each stage, then the cross-border interface, the AML and travel-rule obligations, the common mistake, and the decision checklist. Internal links connect to related guides on the Hong Kong–Mainland and Hong Kong–Singapore pairings.

What decision does the reader actually face?

The threshold question is not "Hong Kong or UAE" – it is "Hong Kong and UAE, in what configuration?" Most digital-asset fund principals who reach us have already identified both centres as desirable. Hong Kong offers common-law courts, an established SFC licensing regime for centralised virtual-asset trading platforms, and access to Greater China capital and deal flow. The UAE – principally the Abu Dhabi Global Market (ADGM) and the Dubai Virtual Assets Regulatory Authority (VARA) perimeter – offers a zero-tax environment, a rapidly expanding virtual-asset regulatory framework, and proximity to Gulf and CIS investor pools.

The decision the reader faces is structural: does the fund manager sit in Hong Kong, the UAE, or both? Where are the fund vehicles incorporated? Where do investors subscribe? Where does trading activity occur? Each answer changes the regulatory trigger. A Hong Kong-incorporated manager that actively solicits UAE-based investors may need to satisfy both the SFC and the relevant UAE authority. A UAE-incorporated manager that uses a Hong Kong entity for trading activity may bring that Hong Kong entity within the SFC's licensing perimeter under the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

The first analytical step is therefore a regulatory-mapping exercise, not an incorporation filing.

What structure options are on the table?

Three configurations appear most commonly in our cross-border practice, and each carries a distinct regulatory footprint.

Configuration A: Hong Kong manager, UAE feeder. The fund manager is licensed or registered in Hong Kong. A separate feeder vehicle – typically in the ADGM or a VARA-recognised free zone – raises capital from Gulf and CIS investors and invests into a master fund administered from Hong Kong. The manager's SFC obligations govern the master-level activity. The feeder vehicle must satisfy the UAE regulatory perimeter for offering interests to UAE-based investors.

Configuration A is common where the principal's investment activity is centred on Greater China digital assets and the UAE is primarily a capital-raising geography. The risk point is that the UAE feeder entity may independently trigger licensing requirements in the UAE if it exercises any discretionary management function, even informally.

Configuration B: UAE manager, Hong Kong execution entity. The fund management company is established and licensed in the UAE. A Hong Kong entity – often a wholly owned subsidiary – is appointed as an execution or trading vehicle, routing orders through Hong Kong-based venues. The UAE manager holds the client relationship and the fund mandate. The Hong Kong entity's activities must be assessed against the SFC licensing perimeter under the Securities and Futures Ordinance and, where virtual assets are involved, against the Anti-Money Laundering and Counter-Terrorist Financing Ordinance's VATP licensing requirement.

Configuration B suits principals whose investor base and management team are UAE-centric but who need a Hong Kong execution presence for market access. The risk point is whether the Hong Kong entity's activities constitute "carrying on a business in a regulated activity" under the Securities and Futures Ordinance, which requires local legal analysis.

Configuration C: parallel-licensed manager. The management entity holds licences in both centres – or two affiliated management entities, one per centre, operate under a shared investment policy. This is the most operationally intensive structure and is appropriate only where there is genuine substantive activity in both jurisdictions. It is rarely the right starting point for a fund below a meaningful asset threshold.

In our desk's experience, Configuration A is the most practical starting point for a Hong Kong-anchored digital-asset fund with UAE investor distribution. Configuration B is the natural form for a UAE-anchored manager that wants a Hong Kong market-access point. Configuration C is built over time, not at inception.

How does the step-by-step sequence work – and what is the gate at each step?

The sequence below follows Configuration A as the reference case. The equivalent steps for Configuration B follow the same logic in reverse. Each step identifies the gate: the condition that must be satisfied before the next step opens.

Step 1: Regulatory-mapping and structure confirmation. Before any entity is incorporated, the principal must confirm which regulated activities each proposed entity will perform in each jurisdiction. In Hong Kong, the relevant perimeter is set by the Securities and Futures Ordinance (type 1, 4, 7 or 9 regulated activity, depending on the strategy) and – where the fund trades virtual assets – the Anti-Money Laundering and Counter-Terrorist Financing Ordinance's mandatory VATP licensing requirement, effective since 1 June 2023. In the UAE, the perimeter depends on whether the activity falls within the ADGM Financial Services Regulatory Authority's regime, the VARA regime for the Emirate of Dubai, or – for non-free-zone activity – the UAE federal Securities and Commodities Authority. Gate: written regulatory-mapping confirmed by counsel in each centre before any entity is incorporated.

Step 2: Entity incorporation. For Configuration A, this means incorporating the Hong Kong manager and the UAE feeder vehicle. The Hong Kong manager is typically a private limited company under the Companies Ordinance (Cap. 622). The UAE feeder vehicle is incorporated in the chosen free zone or mainland UAE registry. Each incorporation must produce the constitutional documents, ownership register and – for the Hong Kong entity – a Significant Controllers Register, which has been mandatory for Hong Kong-incorporated companies since 1 March 2018. Gate: entities incorporated; statutory registers in place; directors and shareholders confirmed to the relevant registries.

Step 3: Hong Kong licensing application to the SFC. The Hong Kong manager applies to the Securities and Futures Commission for the relevant type of licence under the Securities and Futures Ordinance. Where the fund will trade virtual assets on a centralised platform, a separate VATP licence assessment under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance is required. The SFC application requires: a fit-and-proper assessment of responsible officers; a business plan; internal compliance policies (including AML and client money); and a description of the fund's investment strategy and the virtual-asset types it will hold. Applications are reviewed sequentially; the SFC may raise several rounds of queries. Realistic timelines for a new-applicant licensing process run to several months and should not be compressed in the project plan. Gate: SFC licence (or formal confirmation of exemption) granted before the Hong Kong manager accepts client assets or instructs on fund trades.

Step 4: UAE regulatory authorisation. The UAE feeder vehicle applies to the relevant UAE authority for its authorisation to carry on the proposed activity. The ADGM Financial Services Regulatory Authority and VARA each operate distinct application processes, fee structures and ongoing prudential requirements. The principal should confirm which regime applies to the feeder's specific activity before commencing. Gate: UAE authorisation granted (or formal confirmation that the feeder's activity is outside the licensing perimeter) before the feeder markets to UAE-based investors.

Step 5: AML and travel-rule programme implementation. Both the Hong Kong manager and the UAE feeder must implement AML and counter-terrorist financing programmes before the fund opens to investors. In Hong Kong, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance requires customer due diligence, ongoing monitoring, and – for virtual-asset transfers – compliance with the FATF travel rule, which obligates VATPs to pass originator and beneficiary information alongside transfers. The UAE authorities impose equivalent requirements under their own AML frameworks. Gate: AML programme documented, tested and signed off by the compliance officer; travel-rule solution in place for virtual-asset transfers.

Step 6: Fund documentation and investor on-boarding. With licensing and AML infrastructure in place, the fund's constitutional documents – limited partnership agreement, private placement memorandum, subscription agreement – are finalised and reviewed against both regulatory regimes. Investor on-boarding triggers the AML programme: source of funds, identity verification and ongoing monitoring. Gate: fund documents reviewed against both regulatory perimeters; investor files complete before subscription proceeds are accepted.

Step 7: Ongoing compliance and cross-border reporting. The licensed entity in each jurisdiction carries ongoing obligations: periodic reporting to the SFC; AML record-keeping; capital or liquidity requirements; and – for the UAE entity – reporting under the applicable UAE virtual-asset rules. Where the fund's consolidated revenue approaches the Pillar Two threshold of EUR 750 million, Hong Kong's minimum top-up tax and income inclusion rule (effective for fiscal years beginning on or after 1 January 2025) must be assessed. Gate: there is no single closing gate; ongoing compliance is the condition on which both licences remain in force.

How does the cross-border interface between Hong Kong and the UAE shape the structure?

The cross-border interface between Hong Kong and the UAE operates at three levels, and each level creates a practical decision point.

First, regulatory nexus (the factual basis on which a regulator claims jurisdiction over an entity's activity). The SFC's licensing perimeter in Hong Kong is activity-based, not entity-based: it is triggered by carrying on a regulated activity in Hong Kong, irrespective of where the entity is incorporated. A UAE-incorporated entity that operates a virtual-asset platform accessible to Hong Kong users may independently trigger the SFC's VATP licensing requirement under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. In our cross-border practice, we regularly see UAE-anchored fund sponsors who have not assessed their Hong Kong nexus precisely because their entity is non-Hong Kong incorporated.

Second, investor-distribution nexus. The UAE's virtual-asset regulatory authorities – VARA for Dubai and the ADGM Financial Services Regulatory Authority for Abu Dhabi – regulate the offer of fund interests to investors in or from the UAE. A Hong Kong-licensed manager that distributes to UAE investors without UAE authorisation is not sheltered by its SFC licence. The two licensing regimes are independent; neither provides a passport into the other's territory.

Third, asset custody and settlement nexus. Where fund assets are digital tokens held on-chain or at a custodian in either jurisdiction, the custody arrangement must be assessed under both regimes. Hong Kong's SFC licensing types include a specific regulated activity for providing automated trading services and for asset management; custody of client assets in connection with these activities triggers further client-money and asset-segregation requirements under the Securities and Futures Ordinance. The UAE's prudential rules on custody vary by the applicable regime.

What foreign counsel regularly miss is that the cross-border interface is not resolved by choosing one jurisdiction over the other. It is resolved by mapping each activity to the jurisdiction in which it occurs and then confirming the regulatory response in that jurisdiction. The map, not the incorporation certificate, decides the structure.

For a related guide on the Hong Kong–Singapore pairing, see our guide to a digital-asset fund structured through Hong Kong and Singapore. For the Hong Kong–Mainland configuration, see our guide to a digital-asset fund structured through Hong Kong and the Mainland.

The sequence above describes the standard position across the two centres. Your structure turns on the documents, the specific activities proposed, and the jurisdictions actually engaged – which is where the regulatory route is won or lost. To discuss how the cross-border interface applies to your fund's position, contact info@lockhartyip.com.

What are the AML and travel-rule obligations that apply across both centres?

AML obligations are not a compliance formality in a digital-asset fund. They are a licensing condition. A fund manager that fails to implement a compliant AML programme before accepting investor subscriptions or executing trades puts its licence application – and its existing licences – at risk.

In Hong Kong, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance governs customer due diligence, record-keeping, suspicious transaction reporting, and – for VATPs – the FATF travel rule. The travel rule requires that a virtual-asset service provider transmits originator and beneficiary information alongside virtual-asset transfers above a threshold. VATPs must have a technical solution in place to send and receive this information. The SFC's AML guidelines elaborate on how these requirements apply to licensed entities and applicants; compliance with those guidelines is assessed as part of the licensing process.

In the UAE, the relevant authority's AML rules impose equivalent customer due diligence and transaction-monitoring obligations. Funds accepting investors from higher-risk jurisdictions must apply enhanced due diligence. The UAE is a member of the Financial Action Task Force (FATF) and its domestic AML framework reflects the FATF recommendations, including the travel rule for virtual-asset transfers.

The cross-border complexity arises where a transfer of virtual assets moves between a Hong Kong entity and a UAE entity within the same fund structure. That transfer may independently engage the travel rule on both sides. A fund with affiliated entities in both centres must ensure its compliance programme addresses the travel rule at each node – not just at the point of external investor transfer.

Hong Kong implements United Nations sanctions. It does not give domestic effect to unilateral measures of other states. Sanctions screening for a digital-asset fund operating across Hong Kong and the UAE must therefore address the UN consolidated list as a minimum, and should be assessed in the context of the fund's investor base, counterparties and the virtual-asset types it holds. The UAE has its own sanctions screening obligations under federal law. Counsel on our desk regularly advise on how to structure the screening programme to address both regimes without conflating them.

What is the common mistake – and how does the correct sequence avoid it?

The most common mistake in a Hong Kong–UAE digital-asset fund structure is treating the two regulatory regimes as sequential rather than concurrent. A principal who incorporates a Hong Kong entity, applies for an SFC licence, and then – once licensed – turns to the UAE to establish the feeder and seek UAE authorisation will face a period during which the fund is formally licensed in Hong Kong but cannot legally distribute to UAE investors. If that period extends, the fund may accept early UAE-based investor expressions of interest informally, which creates a potential regulatory exposure in the UAE and a potential AML problem in Hong Kong.

The correct sequence does not require both licensing processes to start on the same day. It requires both licensing processes to be designed and planned in parallel from the outset, so that neither leg of the structure is advanced in isolation. The regulatory-mapping exercise at Step 1 is the mechanism that enforces parallelism: it identifies every activity in every jurisdiction before any entity is incorporated, and it confirms which authorisation must be in place before which activity commences.

A second common mistake is under-specifying the virtual-asset types the fund will hold. Both the SFC in Hong Kong and the UAE authorities differentiate between virtual assets that are securities or regulated investment products and those that are not. The regulatory perimeter – and therefore the licence type required – depends on the classification of the assets. A fund that proposes to hold a broad range of virtual assets without first confirming the classification of each asset may find, mid-application, that its proposed strategy requires an additional or different licence type. That discovery mid-process adds months to the timeline and may require structural changes.

A third mistake is deferring the AML programme design until after licensing. Regulators in both centres review the AML programme as part of the licensing assessment. A programme that is drafted quickly to meet a submission deadline, without being properly tested or integrated into the fund's operational processes, will draw regulator queries and delay the licence grant.

Decision checklist: where does your fund sit?

The checklist below is designed for a principal at the outset of structuring a digital-asset fund across Hong Kong and the UAE. It identifies the questions that determine the structure and the sequence. It is not a substitute for legal analysis of the specific fund.

Regulatory perimeter. Has each proposed entity's activity been mapped against the SFC's licensing perimeter in Hong Kong and the applicable UAE authority's perimeter? Has the classification of the virtual assets the fund proposes to hold been confirmed in both jurisdictions?

Structure configuration. Is the management function centred in Hong Kong (Configuration A), the UAE (Configuration B), or genuinely split (Configuration C)? Has the choice been made on the basis of where substantive investment management activity will actually occur, not on the basis of tax or branding preference alone?

Investor distribution. Where will the fund be marketed? If UAE-based investors will be solicited, has the UAE regulatory authorisation requirement been assessed for the entity doing the soliciting? If Hong Kong-based investors will be solicited, has the SFC's position on investor-facing materials been confirmed?

AML programme. Is a complete AML and counter-terrorist financing programme – including a travel-rule solution for virtual-asset transfers – in place before any investor subscription proceeds are accepted in either jurisdiction?

Custody and settlement. Has the custody arrangement been assessed against both the Hong Kong client-money and asset-segregation requirements and the applicable UAE prudential rules? Is the custodian authorised in the relevant jurisdiction?

Tax position. Has the fund's tax position in each jurisdiction been assessed, including the interaction of Hong Kong's territorial profits tax system (with the foreign-sourced income exemption regime in force since 1 January 2023), the UAE's applicable tax environment, and – for larger structures – the Pillar Two income inclusion rule?

Parallel-process plan. Is there a project plan that coordinates the Hong Kong and UAE licensing processes in parallel, with identified gates before investor-facing activity commences in each centre?

If any of these questions is unresolved, it should be resolved before incorporation – not after. The cost of re-structuring a fund that has already commenced a licensing process in one centre is substantially higher than the cost of front-loading the analysis.

If an earlier filing, structure or licensing attempt has produced an adverse or stalled result in either centre, a second read can identify the structural error and the routes still open. Write to us at info@lockhartyip.com.

For a full overview of our Tech & Web3 practice – covering VATP licensing, AML compliance, stablecoin structuring and digital-asset fund work across Hong Kong and the principal offshore centres – see our Tech & Web3 practice page.

Related practices

Sanctions & AML – cross-border AML programme design, travel-rule compliance and sanctions-neutral contracting
Holding Structures – offshore and Hong Kong holding configurations for digital-asset fund vehicles

Frequently asked questions

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

The first step is a regulatory-mapping exercise that identifies every regulated activity each proposed entity will perform in each jurisdiction, and confirms the classification of the virtual assets the fund proposes to hold. This mapping determines which licensing regime applies in Hong Kong under the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, and which UAE authority – VARA, the ADGM Financial Services Regulatory Authority or the federal Securities and Commodities Authority – governs the UAE leg. No entity should be incorporated before this mapping is complete.

How long does a digital-asset fund structured through Hong Kong and the UAE usually take?

Timeline depends on the complexity of the proposed strategy, the virtual-asset types involved and the completeness of the application documentation. The SFC's licensing process for a new applicant involves multiple review cycles and should not be compressed below several months in a realistic project plan. The UAE authorisation process varies by the applicable regime and the proposed activity. Where both processes must be coordinated in parallel – which is the recommended approach – the critical path is typically the longer of the two licensing timelines, plus the AML programme implementation period before investor on-boarding can commence.

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

The cross-border element means that neither the SFC licence nor the UAE authorisation alone is sufficient. Each licensing regime is independent: an SFC licence does not authorise distribution to UAE-based investors, and UAE authorisation does not cover regulated activities carried on in Hong Kong. The fund structure must map each activity to the jurisdiction in which it occurs, confirm the regulatory response in that jurisdiction, and ensure that no investor-facing activity commences in either centre before the relevant authorisation is in place. AML obligations, including the FATF travel rule for virtual-asset transfers, apply in both centres and must be addressed at each node of the structure.

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

A practical guide to a digital-asset fund structured through Hong Kong and the UAE