Hong Kong is one of the Asian countries that has shown a highly open attitude towards the development of the fintech industry. This is one of the reasons why investors are keen to set up companies in Hong Kong.
Cryptocurrencies and blockchain benefit from the city's favorable business regime, with the number of startups in the field increasing in recent years.
Compared to other Asian countries, Hong Kong stands out for its favorable regulatory regime and policies towards blockchain and cryptocurrency providers.
Quick Facts | |
Cryptocurrencies considered legal tender (Yes/No) | No |
Local regulator | Hong Kong Securities and Futures Commission |
Special license to open a cryptocurrency company in Hong Kong | Virtual asset trading platform operators are licensed by the SFC |
Special license for cryptocurrency exchanges in Hong Kong | Yes |
Anti-money laundering rules | Yes, for cryptocurrency exchanges |
Residency requirements for investors opening a cryptocurrency company in Hong Kong | No |
Types of companies used to open a cryptocurrency company in Hong Kong | Private or Public Limited Liability Company (LLC) |
Minimum capital for cryptocurrency companies in Hong Kong | Not applicable |
Minimum number of shareholders | 1 |
Minimum number of directors | 1 |
Business license | Standard business license for all companies, issued by the Companies Registry upon registration |
Mandatory address requirements for cryptocurrency companies | Registered office in Hong Kong |
Cryptocurrency company taxation | The corporate income tax rate for the first HK$2 million of assessable profits is 8.25%, and the corporate income tax rate for the remaining profits is 16.5% |
Reasons to open a cryptocurrency company in Hong Kong | Low tax system easy to incorporate No nationality restrictions Cryptocurrency and blockchain friendly |
One of our company formation consultants in Hong Kong can provide you with full details on the requirements needed to open a cryptocurrency company in Hong Kong, as well as the cost of starting a business.
OPENING A CRYPTO COMPANY IN HONG KONG |
Understand the requirements Cryptocurrency rules Cryptocurrencies are not considered legal tender in Hong Kong and are therefore treated as "virtual commodities" that are not subject to the rules that normally apply to banks. |
Follow the rules Special law Cryptocurrencies are evaluated to determine whether they have rights similar to traditional securities. License is required and subject to anti-money laundering laws. |
Select legal entity type Start incorporation A cryptocurrency company is usually incorporated as an LTD, which requires having a registered address and choosing an available company name. |
Register business Hong Kong company registration Once the company documents are drawn up and signed by the founders, the company is registered with the Companies Registry in Hong Kong. |
Post-registration steps Additional license Once registered, cryptocurrency companies can open bank accounts in Hong Kong and start trading after obtaining a license (i.e. trading platforms) |
Hong Kong, Cryptocurrency Hub
Cryptocurrencies are virtual currencies that use special encryption techniques for security purposes. This makes the currency difficult to counterfeit. Furthermore, this currency is not issued by a central authority, thus clearly separating it from the government and its control.
The first cryptocurrency known to the general public was Bitcoin. Now, other blockchains like Ethereum have made their debut in financial centers like Hong Kong.
The SAR classifies Bitcoin and other cryptocurrencies as a virtual commodity created in a virtual world.
The Securities and Futures Commission regulates crypto assets. The law mandates specific Hong Kong cryptocurrency exchange licenses, and the distribution of crypto assets is subject to conditions. There is a formal Hong Kong crypto license. A number of regulatory requirements are already in place, and investors can read more about them below.
Hong Kong remains one of the major crypto/blockchain markets in Asia due to its robust approach to financial services.
Although it is a city and special administrative region of China, Hong Kong does not view and treat cryptocurrencies the same way, and setting up a company in Hong Kong is simple.
While ICOs (the cryptocurrency equivalent of IPOs) are banned in China, they are allowed in Hong Kong, and while the mainland continues to restrict access to the space, Hong Kong remains open, taking advantage of restrictions implemented in jurisdiction in such close proximity.
The fact that the SAR is separate from China has attracted many foreign companies, multinational corporations and foreign investors.
Experts believe that Hong Kong is an ideal jurisdiction for those who want to open a Hong Kong company active in the crypto/blockchain industry.
Treatment of Cryptocurrency Companies in Hong Kong
Setting up a company in Hong Kong is an attractive option for investors in blockchain and cryptocurrencies, not only because of the local business-friendly conditions, but also because of the pragmatic approach in the space.
As mentioned above, China has not implemented favorable policies, and this can be used to the advantage of Hong Kong, especially because its overall approach is positive.
Many investors are not only opening companies involved in the development of blockchain technology or launching initial coin offerings, but also opening cryptocurrency exchanges. The regime for these activities is regulated. The Securities and Futures Commission regulates the regime for cryptocurrency exchanges (the regulatory sandbox).
For funds managed and marketed in Hong Kong, approval from the Securities and Futures Commission is required when more than 10% of assets are invested in cryptocurrencies.
A distinction can be made in the treatment of virtual currencies: they can be considered as virtual currencies or virtual commodities, as virtual assets, as part of a fund (also considered a virtual asset) or as part of an exchange.
Under Hong Kong law, there is no foreign exchange control policy. Cryptocurrency exchanges, as well as bitcoin ATMs in Hong Kong, are not among the types of businesses that require a Money Service Operator License.
As far as the taxation of cryptocurrency income is concerned, such income will be stated in the tax return.
According to local tax laws, income earned in Hong Kong is subject to local tax, while income earned outside Hong Kong is exempt from tax. Locally incorporated companies are not taxed on their worldwide income, while non-resident companies are taxed on their Hong Kong-sourced income. One of our consultants specializing in Hong Kong company formation can provide more details on the requirements and guidelines set by the Commission.
Hong Kong Crypto License and other Related Requirements
As mentioned earlier, there are many conditions for the distribution of crypto assets.
Our team has briefly listed the key regulatory requirements below.
Distribution of Crypto Assets
Businesses acting as intermediaries, such as those holding a Hong Kong cryptocurrency exchange license, must comply with a number of conditions when providing these services:
Suitability: the virtual asset or related product needs to be suitable for the client under any circumstances;
Information: intermediaries should provide sufficient information on the nature of virtual assets and their risks, with the aim of keeping clients well informed;
Warnings: provide warning statements to clients as needed.
Companies that have obtained a Hong Kong crypto license must treat virtual asset-related products as complex products and comply with existing relevant regulations.
Virtual asset trading platforms regulated by the SFC, meaning they have a Hong Kong cryptocurrency exchange license, are required to provide appropriate investor protection, and need to comply with the following regulations:
Comply with existing SFC and HKMA requirements for dealing in securities and providing virtual asset trading services, even where the virtual asset is not a security;
Company with the same requirements when they provide crypto advisory services (observe the conditions of distributing assets).
In addition to this, they also need to conduct a virtual asset knowledge test before they can provide crypto consulting services.
This test is conducted by intermediaries to determine whether their clients have the knowledge required to invest in virtual assets or related products before the intermediary transacts on their behalf.
If the client does not have the knowledge, the company can only proceed if it acts in the best interest of the client and complies with other regulations.
There are exceptions to the virtual asset knowledge test for Institutional Professional Investors and qualified Corporate Professional Investors.
Examples of complex products that should only be offered to professional investors include overseas virtual asset non-derivative exchange-traded funds (ETFs).
Investors should note that the regulations set out by the SFC and HKMA as briefly outlined above will be enforced by each company (intermediary) offering virtual asset related activities.
New companies will need to comply with licensing requirements, such as those required for a Hong Kong cryptocurrency exchange license, and ensure compliance with all ongoing requirements before commencing their activities.
We remind interested investors of the prerequisites for obtaining a Hong Kong crypto license:
Be incorporated in Hong Kong;
Pass the fit and proper test;
Appoint a Compliance Officer.
Conditions for Setting Up a Company in Hong Kong
Cryptocurrency companies in Hong Kong need to be incorporated under the current company law. All new corporate structures are registered with the Companies Registry and operate under a Business Registration Certificate.
Registering a company in Hong Kong is usually a simple process. Here are the main steps an investor can follow when deciding to open a company:
Choose a company name: The name of the new company needs to be unique and follow name guidelines; this can be checked online.
Preparation of company documents: Articles of Association need to be drafted according to the type of company and its particularities.
Arrangement of address: A locally incorporated company must have a registered address in Hong Kong.
Corporate structure: Appoint directors and determine the general structure of the company, including the secretary.
Registration: Submit the registration form to the Companies Registry along with all required documents.
These steps are related to forming an LLC. If you choose this form of business, our team can help you set up your company in Hong Kong.
A private limited liability company is one of the most commonly used business forms in Hong Kong and is also suitable for those opening a cryptocurrency company. One of our company formation consultants in Hong Kong can assist you during the company formation process. Crypto companies registered as private companies in Hong Kong are not required to file annual financial statements with the Companies Registry, but are required to maintain their books of account. Our accountants in Hong Kong can help investors with proper bookkeeping services as well as other solutions, no matter what industry they are in. The Hong Kong government has a positive attitude towards blockchain and cryptocurrencies, and many projects are active in the jurisdiction, as well as several consultations and recommendations in this field. Investors can benefit from registering a company in Hong Kong and subsequently starting a crypto or blockchain business.
Investments in Hong Kong
Overall, the attractiveness of the SAR as a financial center and business destination is highlighted with the help of the following statistics:
January 2023 formation: 6,310 private and 4 public company formations;
Incorporation in February: 10,637 private companies and 1 public company registered in the Companies Registry;
Established in March: there are 2 public companies and 26,099 private companies.
Investors considering starting a cryptocurrency business in Hong Kong can contact us for more details on the current regulatory regime and assistance.
For more information and advice on how to set up a company in Hong Kong, please contact us.
Regulation of virtual asset trading platforms
Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the SFC
The Guidelines for Virtual Asset Trading Platform Operators
Operators of virtual asset trading platforms are to comply with the SFC’s standards.
The Guidelines set out, among others, safe custody of assets, segregation of client assets, avoidance of conflicts of interest and cybersecurity standards and requirements expected of licensed trading platforms.
The Guidelines for Virtual Asset Trading Platform Operators
The Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers)
The Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities of Licensed Corporations and SFC-licensed Virtual Asset Service Providers
Licensed trading platform operators are allowed to serve retail investors. A number of robust measures protects these investors including ensuring suitability in the onboarding process, good governance, enhanced token due diligence, admission criteria and disclosures.
Bestar provides guidance on the regulatory requirements, as well as other implementation details including licence application procedures. Operators of virtual asset trading platforms are welcome to apply for a licence.
The application forms for virtual asset trading platforms to apply for the relevant licences under the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance
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