How to approach a digital-asset fund structured UK

A digital-asset fund that reaches across Hong Kong and the United Kingdom sits at the intersection of two active, distinct regulatory regimes. Both jurisdictions have moved quickly since 2023. Both have introduced mandatory licensing with criminal-liability backstops. And the two regimes do not mirror each other: the regulator that applies, the licence category that governs, and the AML obligations that flow from each differ in ways that catch foreign principals and their in-house counsel by surprise.

A Hong Kong – United Kingdom digital-asset fund structure requires parallel analysis of the licensing posture under Hong Kong's mandatory virtual-asset trading platform regime – administered by the Securities and Futures Commission under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance – and the United Kingdom's Financial Conduct Authority registration and authorisation requirements for cryptoasset activities, each with its own AML obligations and its own gate before the fund may operate. The sequence in which those two tracks are opened, and the documents that bind them, determines whether the structure is compliant or exposed from day one.

This guide takes the decision in order: the opening choice, the step-by-step sequence, the gate at each stage, the common structural mistake, and a short checklist before launch. It is addressed to the in-house counsel or fund principal who already knows they need both jurisdictions and wants a clear view of the route.

What is the decision, and what options does a dual-jurisdiction structure actually present?

The first decision is whether the two jurisdictions are genuinely both needed or whether one is being added for optics rather than substance. That question matters because both Hong Kong and the United Kingdom now impose economic-substance conditions on financial-services entities operating in their markets. A registered address without real activity no longer closes the regulatory question.

A dual Hong Kong – United Kingdom digital-asset fund structure typically arises in one of three configurations. First, the fund entity itself is established in Hong Kong, with a UK subsidiary or manager entity conducting activities that require UK regulatory permission. Second, the structure is reversed: a UK-authorised manager or fund operates the fund, with a Hong Kong entity managing the Greater China investor base or the digital-asset trading relationship with an exchange licensed in Hong Kong. Third – and this is where the structural complexity concentrates – the two entities operate at the same level, with each holding separate regulatory permissions and conducting activities on behalf of a common pool of capital.

Each configuration produces a different primary regulator, a different AML-reporting chain, and a different cross-border information-sharing obligation. In our cross-border practice, we see principals make the configuration choice without first mapping the regulatory trigger in each jurisdiction. The result is a structure that is over-licensed in one place and unlicensed in the other – or one that works on paper until a redemption request, a Suspicious Activity Report, or a counterparty onboarding check reveals the gap.

The option table, therefore, is not a choice between Hong Kong and the United Kingdom. It is a choice of which entity performs which regulated function, in which jurisdiction, under which licence. That analysis must precede the entity-formation step.

Step 1: Identify the regulated activities and the correct licensing category in each jurisdiction

The first substantive step is a regulated-activities map – a written assessment of what the fund will do in each jurisdiction and whether those activities fall within the perimeter of the relevant licensing regime.

In Hong Kong, the mandatory virtual-asset trading platform (VATP) licensing regime commenced on 1 June 2023 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. The Securities and Futures Commission is the licensing authority. Separately, where a digital asset constitutes a "security" or "futures contract" within the meaning of the Securities and Futures Ordinance, SFC licensing under that Ordinance also applies. A fund that holds or trades tokens that sit in either category – and many tokens cross that line without the issuer having intended it – is within scope of both regimes simultaneously.

In the United Kingdom, the Financial Conduct Authority administers the registration regime for cryptoasset businesses and the broader authorisation requirements that apply to collective investment schemes and investment managers. Registration under the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations is a gate that applies to any firm carrying on cryptoasset activity in the United Kingdom. Authorisation under the Financial Services and Markets Act framework applies where the fund's activities amount to regulated financial services. The two tracks – AML registration and financial-services authorisation – run in parallel and address different risks.

The gate at this step is a reasoned, documented conclusion on the licensing category that applies to each entity before any application is submitted. Applying under the wrong category resets the clock and, in Hong Kong, can trigger a period of unlicensed operation that carries criminal liability under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Parties should verify the current perimeter and licence categories with their advisers before proceeding.

Step 2: Assess the AML obligations in both jurisdictions and build a single, consistent customer-due-diligence architecture

AML obligations in a dual-jurisdiction digital-asset fund are not satisfied by running two separate compliance programmes that happen to share a name. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong and the UK Money Laundering Regulations impose overlapping but not identical obligations. Where the same investor is onboarded in both jurisdictions, or where funds flow between the Hong Kong and UK entities, the two programmes must be consistent – or the gap between them becomes a source-of-funds exposure.

The FATF travel rule applies to VATPs in Hong Kong. That means that virtual-asset transfers above the relevant threshold must carry originator and beneficiary information. The United Kingdom has implemented equivalent travel-rule requirements for cryptoasset transfers. A fund that moves digital assets between its Hong Kong and UK entities, or between either entity and an external exchange, must have a documented travel-rule procedure that satisfies both regimes simultaneously.

In our cross-border practice, the most common AML gap we see in dual-jurisdiction structures is the treatment of politically exposed persons and high-risk investors. Hong Kong's AML guidelines and UK supervisory guidance apply different risk-rating criteria. A PEP assessment conducted under one jurisdiction's framework does not automatically satisfy the other. The practical answer is a risk-assessment matrix that maps each investor category against both sets of requirements and identifies the higher standard. Where the standards diverge, the higher one governs.

The gate at this step is a written, board-approved AML policy that explicitly references both the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the applicable UK AML legislation, identifies the responsible officer in each jurisdiction, and documents the escalation path for Suspicious Activity Reports filed with the Joint Financial Intelligence Unit in Hong Kong and the National Crime Agency in the United Kingdom. Both filings may be required for the same underlying transaction.

For guidance on the broader cross-border AML and sanctions position that touches Mainland counterparties and data flows, see our briefing on cross-border SaaS and data agreements touching the Mainland.

Step 3: Structure the fund entity sequence and determine which regulator's application comes first

Once the regulated-activities map and the AML architecture are settled, the next question is which regulatory application to open first. This is a sequencing question, not a procedural formality. The answer turns on the configuration chosen in Step 0 and on which jurisdiction the fund's primary investor base and trading activity will be located.

Where the Hong Kong entity is the primary manager and the UK entity is a distribution or sub-advisory vehicle, the Hong Kong VATP application – or the SFC licensing application under the Securities and Futures Ordinance – should open first. The reason is practical: the Hong Kong licence sets the scope of the permitted activities, and the UK entity's regulatory perimeter will be shaped by the activities the Hong Kong entity is licensed to conduct. Submitting the UK application before the Hong Kong scope is confirmed risks a mismatch between the two licences.

Where the UK entity is the primary fund manager and the Hong Kong entity is the trading or custody arm, the sequence reverses. The Financial Conduct Authority's authorisation or registration determines the fund's investment strategy and the redemption terms. The Hong Kong entity then applies for the licence category that matches its defined role – which, if it is restricted to trading on behalf of the UK manager, may be a narrower category than a standalone fund manager would require.

In either case, the two applications should not be submitted simultaneously without a co-ordination document – a term sheet or a heads of agreement that describes the division of activities between the two entities. Regulators in both jurisdictions will ask how the cross-border arrangement is governed. An answer that refers to a detailed intercompany agreement in draft is more persuasive than a verbal description.

The gate at this step is a completed regulatory-perimeter analysis, a chosen configuration, a sequencing plan with target timelines, and a draft intercompany agreement that describes the regulated activities in each jurisdiction. Nothing should be submitted to either regulator until those four documents exist.

What does foreign counsel get wrong, and how does the common structural mistake arise?

The most common mistake in a Hong Kong – United Kingdom digital-asset fund structure is treating the two regulatory tracks as administrative parallel processes rather than as interdependent substantive analyses. Counsel or compliance officers who know one jurisdiction well tend to run their own jurisdiction's process and hand off the other to local agents. The handoff is where the gap opens.

Consider a fund principal who retains a London-based compliance firm to handle UK FCA registration and instructs a Hong Kong corporate-services firm to incorporate the Hong Kong entity and manage the VATP application. Neither party has a full picture of the fund's activities. The London firm builds an AML programme for the UK entity based on its defined activities. The Hong Kong firm prepares the VATP application based on the activities described in the incorporation documents. If the two descriptions of the fund's activities diverge – even by a clause in the fund's constitutional documents – the AML programme does not cover the actual activities in Hong Kong, and the VATP application does not reflect the actual structure the UK entity is operating.

A European family office came to us in autumn 2026 after a stalled SFC licensing process. The Hong Kong VATP application had been prepared without reference to the UK fund documents. The SFC's queries focused on the cross-border flow of investor funds and the governance of the intercompany arrangement. We co-ordinated a revised description of the structure, aligned the constitutional documents, and updated the AML policy to cover both entities. The application moved in the following review cycle.

The fix is to appoint a single co-ordinating adviser who holds the full structure and reviews both sets of regulatory documents before either is submitted. That co-ordinator does not need to be admitted in both jurisdictions. They need to understand both regimes well enough to identify the interdependencies and direct the local teams on the points of divergence. That is precisely the role international counsel plays in a dual-jurisdiction structure of this kind.

For the comparable sequencing question in a Hong Kong – Cayman structure, see our guide on digital-asset fund structured through Hong Kong and Cayman.

Step 4: Negotiate and execute the governing documents with both regulatory regimes in mind

The fund's constitutional documents – its limited partnership agreement, trust deed, or company articles, depending on the vehicle chosen – must be drafted with both the Hong Kong and UK regulatory perimeters visible to the drafter. This is not a standard exercise in fund formation. It is a cross-border document exercise in which a clause that satisfies one regulator may create a problem for the other.

The investment objective clause illustrates the point. In a UK-regulated fund, the investment objective must be consistent with the fund's FCA-authorised category. In a Hong Kong VATP context, the range of virtual assets the fund may hold or trade is constrained by the licence conditions. If the investment objective clause is drafted to the UK standard without reference to the Hong Kong licence conditions, the fund may be authorised in the United Kingdom to invest in assets it is not licensed to hold or trade in Hong Kong.

The subscription and redemption mechanics require particular attention. A redemption demand that triggers a sale of digital assets on a Hong Kong-licensed exchange involves the VATP's execution procedures, its travel-rule obligations, and its AML sign-off. That chain must be described in the fund documents in terms that the UK manager can operationalise. Redemption mechanics that assume a single-jurisdiction structure – where all assets are liquidated and proceeds transferred in a single step – do not work in a cross-border arrangement where two licensed entities are involved in the same transaction.

The gate at this step is a complete set of constitutional documents reviewed against both the Hong Kong VATP licence conditions (or SFC licence conditions, as applicable) and the UK FCA authorisation scope, with any divergence resolved before the documents are executed. Allied counsel admitted in the relevant jurisdiction should review the UK-law elements; our desk co-ordinates that review against the Hong Kong and international-law analysis.

Step 5: Establish the ongoing compliance infrastructure before investor onboarding begins

A fund that has obtained its licences in both jurisdictions but has not operationalised its compliance infrastructure before the first investor subscription is in a materially weaker position than its licence conditions suggest. Both the Securities and Futures Commission and the Financial Conduct Authority conduct post-authorisation inspections. Both assess the quality of the AML and risk-management systems in operation, not merely the systems described in the application.

The ongoing compliance infrastructure for a dual-jurisdiction fund requires, at minimum: a named responsible officer in Hong Kong for the purposes of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance; a named Money Laundering Reporting Officer in the United Kingdom; a documented investor-onboarding procedure that satisfies both regimes; a transaction-monitoring system configured for the fund's actual asset classes; and a periodic-review schedule that maps regulatory reporting deadlines in both jurisdictions.

We regularly advise on the cross-border dimension of this infrastructure – specifically, how to build a single investor-onboarding file that satisfies both the Hong Kong and UK customer-due-diligence standards without requiring the investor to submit materially different documentation to each entity. The answer is a master KYC file held at the level of the co-ordinating entity, with jurisdiction-specific supplements appended for each regulator's specific requirements. That architecture also simplifies the response to a regulatory examination, because the compliance team can produce a complete file without reassembling documents from two separate systems.

The gate at this step is a confirmed compliance-infrastructure checklist, signed off by the responsible officers in both jurisdictions, before the first investor subscription is processed.

Our full service description for Tech & Web3 advisory work – including VATP licensing, AML architecture and cross-border structuring – is set out at our Tech & Web3 practice page.

Decision checklist before launch

The following checklist maps the minimum gates that a Hong Kong – United Kingdom digital-asset fund structure must pass before it is ready to onboard investors. It is not exhaustive; it reflects the gates most commonly missed in a dual-jurisdiction structure.

Regulated-activities map completed for both Hong Kong and the United Kingdom, with written conclusions on the applicable licence category in each jurisdiction.
Configuration decision documented – which entity is the primary manager, which is the sub-adviser or trading arm, and why.
Licensing applications submitted and approved in both jurisdictions, or a documented plan for the sequence and timeline, with the co-ordination document in place.
AML policy in force that explicitly references both the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the applicable UK AML legislation, with a named responsible officer in each jurisdiction.
Travel-rule procedure documented for virtual-asset transfers between the two entities and between either entity and external counterparties.
Constitutional documents reviewed against both sets of licence conditions, with the investment objective, subscription mechanics, and redemption mechanics aligned.
Intercompany agreement executed, describing the division of regulated activities, the fee-sharing arrangement, and the governance of cross-border transactions.
Investor-onboarding procedure tested against a sample investor file before go-live, with the master KYC architecture confirmed.
Periodic-review schedule established, mapping regulatory reporting deadlines in both jurisdictions and the responsible officer for each deadline.

If any item on this checklist cannot be confirmed, the fund is not ready to onboard investors. The exposure that follows from premature investor onboarding – unlicensed activity, AML breach, or a constitutional document that does not match the licence conditions – is significantly more costly to resolve than a delayed launch.

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 digital-asset fund structure across Hong Kong and the United Kingdom, write to us at info@lockhartyip.com.

A note on the objection that one jurisdiction's regime is sufficient

A common view among fund principals – and, frankly, among some advisers in single-jurisdiction practices – is that a fund can be structured to operate in practice from one jurisdiction while holding a regulatory permission in the other as a formality. That view has not survived regulatory scrutiny in either Hong Kong or the United Kingdom in recent years.

The Securities and Futures Commission assesses substance. A VATP licence held by a Hong Kong entity that has no staff, no systems, and no decision-making capacity in Hong Kong will not survive a supervisory review. Similarly, the Financial Conduct Authority has declined registrations and authorisations from entities that cannot demonstrate that the individuals responsible for the business are based in the United Kingdom and that the compliance function operates from there.

Substance is therefore not an optional upgrade. It is a licence condition. The practical implication for a dual-jurisdiction fund is that the structure must be designed so that each licensed entity has the staff, the systems, and the governance capacity to satisfy its own regulator's substance requirements independently. That design question belongs at the beginning of the structuring exercise, not as an afterthought when the first supervisory query arrives.

If an earlier filing, structure, or compliance architecture produced an adverse or stalled result in either jurisdiction, a second read can identify the strategic error and the routes still open. Write to info@lockhartyip.com to discuss the position.

Related practices

Sanctions & AML – AML obligations, customer due diligence and travel-rule compliance for cross-border structures
Holding Structures – cross-border entity design above Hong Kong and offshore fund-holding centres

Frequently asked questions

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

The first step is a regulated-activities map – a written analysis of what the fund will actually do in each jurisdiction and whether those activities fall within the licensing perimeter of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong and the Financial Conduct Authority's registration and authorisation regime in the United Kingdom. This analysis determines the applicable licence category in each jurisdiction and must precede any entity formation or regulatory application. Submitting an application under the wrong category resets the timeline and, in Hong Kong, may trigger a period of unlicensed activity carrying criminal liability.

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

Timing depends on the configuration chosen, the completeness of the application documents, and each regulator's current review queue. Neither the Securities and Futures Commission nor the Financial Conduct Authority publishes fixed processing timelines for digital-asset licensing applications. In our cross-border practice, structures where the regulated-activities analysis is completed before the application is submitted, and where the intercompany co-ordination document is in place, move materially faster than those where the documentation is assembled reactively in response to regulatory queries. Parties should verify the current processing position with their advisers before setting a fund-launch date.

Do I need a Hong Kong adviser for a digital-asset fund structured through Hong Kong and the United Kingdom?

An adviser who holds the full structure – across both the Hong Kong and UK regulatory perimeters – is essential to a dual-jurisdiction fund. A UK adviser who does not know the Hong Kong VATP regime, and a Hong Kong agent who does not know the FCA's cryptoasset authorisation requirements, cannot identify the interdependencies between the two sets of documents. The most common structural errors in dual-jurisdiction digital-asset funds arise precisely at that handoff point. International counsel co-ordinating both tracks, alongside locally admitted firms where Hong Kong law is engaged, is the architecture that avoids those errors.

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

How to approach a digital-asset fund structured through Hong Kong and the United Kingdom