AI summaryAs a financial hub in Asia, Hong Kong has consistently been at the forefront of global regulation in the virtual currency market. For instance, the new Virtual Asset Trading Platform (VATP) licensing regime implemented on June 1, 2023, the recently released consultation paper on the regulation of stablecoin issuance, and the list of sandbox applicants all mark significant steps forward in Hong Kong’s regulation of virtual currencies. These measures aim to enhance overall market integrity and stability by improving investor protection and market transparency, while also providing clear regulatory guidance for crypto projects operating in Hong Kong, thereby attracting attention from global investors and crypto enterprises. Mankun lawyers are frequently asked in consultations,
As a financial hub in Asia, Hong Kong has consistently been at the forefront of global regulation in the virtual currency market. For instance, the new Virtual Asset Trading Platform (VATP) licensing regime implemented on June 1, 2023, the recently released consultation paper on the regulation of stablecoin issuance, and the list of sandbox applicants all mark significant steps forward in Hong Kong’s regulation of virtual currencies.
These measures aim to enhance overall market integrity and stability by improving investor protection and market transparency, while also providing clear regulatory guidance for crypto projects operating in Hong Kong, thereby attracting attention from global investors and crypto enterprises.
Mankun lawyers are frequently asked in consultations about which well-known projects have established themselves in Hong Kong. Therefore, this article briefly reviews the major crypto projects operating under this strict regulatory background, providing reference for entrepreneurs hoping to establish themselves in Hong Kong.
* The following ranking is not in any particular order; it is sorted only by year of establishment.
#Gaming #Metaverse #Gaming Platform
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Year Established: 2012
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Website: sandbox.game
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Financing: USD 117 million, led by Animoca Brands, Hashed, Kingsway Capital, and SoftBank Vision Fund
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Chains: Ethereum, Polygon
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Basic Introduction: The Sandbox is a decentralized, community-driven gaming ecosystem where creators can share voxel assets and gaming experiences on Ethereum and monetize them. Within The Sandbox’s economic system, users can engage in gaming activities on the Ethereum blockchain using the platform token SAND. Its ASSETS and LAND exist in the form of NFTs. In addition to completing in-game tasks, users can also purchase SAND on other cryptocurrency trading platforms and profit from transactions.
Currently, Hong Kong has not enacted specific laws or policy regulations governing the distribution of games. However, The Sandbox involves substantial transactions of NFTs and the SAND token, and the issuance of SAND may also be deemed an Initial Coin Offering (ICO).
The land, assets, and SAND in The Sandbox are units expressing asset value in digital form and can be used for investment purposes. They should therefore fall within the scope of virtual assets recommended for regulation in the relevant consultation summary. Furthermore, The Sandbox’s establishment of a marketplace within its game to facilitate trading of land and assets may potentially lead to its classification as a virtual asset service provider, subjecting it to government regulation.
However, from the perspective of actual regulatory practice, the current focus of the government and the Securities and Futures Commission (SFC) of Hong Kong is primarily on the issuance and trading of tokens with payment utilities or those that may be classified as securities. Thus, the issuance and trading of NFTs with merely commodity attributes (such as the land and assets in The Sandbox) are not currently subject to regulation.
#CeFi #Payments
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Year Established: 2018
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Website: alchemypay.org
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Financing: USD 10 million
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Chains: Ethereum, BNB Chain
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Basic Introduction: Alchemy Pay was founded in 2017 and is headquartered in Singapore. It is a payment gateway designed to seamlessly connect cryptocurrencies with traditional fiat currencies for businesses, developers, and users. The platform supports payments in 173 countries.
Alchemy Pay’s on-ramp and off-ramp services provide a one-stop solution for buying and selling cryptocurrencies and fiat currencies, allowing platforms and decentralized applications (dApps) to integrate easily according to their needs. Its white-label crypto card solution enables businesses and token issuers to provide branded virtual or physical cards to users for instant global spending. The NFT checkout feature supports the direct purchase of NFTs via fiat payment methods. ACH is Alchemy Pay’s network token, available on Ethereum and BNB Chain.
In the increasingly regulated niche of crypto assets, Alchemy Pay has not been defeated; on the contrary, its forward-looking compliance philosophy is helping the company develop and rise rapidly in overseas markets. In January 2023, Alchemy Pay’s founder, Shawn Shi, was selected for the "2022 Forbes China Web3.0 Innovation Pioneers" list. Today, Alchemy Pay has become a payment service provider linking users in 173 overseas countries with global fiat currencies and crypto assets. It has established partnerships with international payment channels such as Visa, Mastercard, Discover, Diners Club, Google Pay, and Apple Pay, as well as hundreds of local payment channels in overseas regions, gradually building a larger partner network.
In March 2024, crypto payment gateway Alchemy Pay announced that, following its existing licenses in Arkansas and Iowa, it had successfully obtained a Money Transmitter License (MTL) in New Hampshire, USA. Additionally, it is actively seeking MTL licenses in other U.S. jurisdictions as part of its efforts to expand its crypto payment services.
#Mining
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Year Established: 2018
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Website: bee-comp.com
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Financing: USD 40 million, and acquired by BIT Mining in 2021
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Basic Introduction: Bee Computing was established in March 2018 as the first enterprise to receive investment from a global semiconductor giant. Inheriting the genetic traits of the semiconductor industry, Bee Computing is proficient in the characteristics and rules of the chip industry. It collaborates with MTK, a top Asian chip design company; TSMC, a world-leading semiconductor manufacturer; and ASE, a leading IC assembly and testing company, to ensure the advanced nature and leading position of its product technology. The company has now mastered 7-nanometer chip technology, provides advanced mining equipment on the market, and began researching and developing Ethereum ASIC chips in 2020.
In Hong Kong, cryptocurrency mining is not an illegal activity, but if conducted on a large scale, it may be subject to regulation under data center laws. Due to the scarcity of land in Hong Kong, operating crypto asset mining activities there would involve significant issues regarding land use rights. Meanwhile, mining enterprises must ensure that the buildings they operate comply with the Building Energy Efficiency Ordinance, a law and regulation enacted to address intensive electricity demand.
#CeFi #Asset Management
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Year Established: 2018
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Website: hashkey.com
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Financing: USD 100 million
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Basic Introduction: HashKey Group is an end-to-end Asian digital asset financial services group that provides new investment opportunities and solutions for institutions, family offices, funds, and professional investors in the digital asset and blockchain ecosystems. The group offers a complete ecosystem across the digital asset sector, including the venture capital fund HashKey Capital, the blockchain node validation service provider HashKey Cloud, the tokenization service provider HashKey Tokenization, as well as HashKey NFT, Web3 PFP incubation, and community operation services.
HashKey Group holds virtual asset operation licenses issued by the Securities and Futures Commission (SFC) of Hong Kong and the Financial Services Agency of Japan. It has also obtained operational qualification exempted under the Payment Services Act by the Monetary Authority of Singapore (MAS).
On November 10, 2022, Hash Blockchain Limited (HBL), a subsidiary of HashKey Group, received a license from the Hong Kong SFC, approving it to operate a virtual asset trading platform under Type 1 (Dealing in Securities) and Type 7 (Providing Automated Trading Services) licenses to serve professional investors.
In 2023, it announced that it had received approval from the Securities and Futures Commission of Hong Kong (the "SFC") for its subsidiary Hash Blockchain Limited ("HBL") to conduct over-the-counter (OTC) trading business outside of virtual asset platforms. When there is trading demand for tokens not listed on exchanges, HBL can act as an intermediary to match transactions between parties.
On April 8, 2024, Weng Xiaoqi, Chief Operating Officer of HashKey Group, stated in an interview that the company had obtained a comprehensive license under Bermuda’s "Digital Asset Investor Protection Regime" and would launch the HashKey Global trading platform. In the first phase, it would offer more than 20 currencies to eligible retail clients, with futures, staking, and other products expected to launch within a quarter. He pointed out that the two platforms have different positioning: HashKey Exchange, licensed in Hong Kong, focuses on the Hong Kong and surrounding markets as well as institutional clients; HashKey Global serves retail clients who cannot access the Hong Kong market, excluding mainland China, Hong Kong, the United States, and countries that explicitly prohibit the operation of virtual asset platforms. The expected main customer base comprises overseas Chinese and users in Southeast Asian countries.
On August 3, 2024, the OTC trading division of HashKey Group received a payment license from the Monetary Authority of Singapore. This license, introduced under the Payment Services Act 2019, allows the company to provide "digital payment token" services in Singapore.
#CEX #Brokerage #Custody #OTC
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Year Established: 2018
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Website: osl.com
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Financing: USD 90 million
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Basic Introduction: OSL is an Asian digital asset platform providing brokerage, custody, exchange, and Software-as-a-Service (SaaS) to institutional clients and professional investors. OSL is the first company to receive Type 1 and Type 7 digital asset licenses from the Securities and Futures Commission of Hong Kong.
In January 2022, the Hong Kong Monetary Authority and the Securities and Futures Commission issued a joint circular allowing registered institutions and licensed entities to cooperate with SFC-licensed virtual asset trading platforms to provide digital asset investment services. The SFC’s Q2 2024 report emphasized significant progress in digital asset regulation, including adding nine new entities to the list of suspected virtual asset trading platforms during the quarter. As of the time of publication, the total number of suspected virtual asset trading platforms reached 42, with only OSL and HashKey holding licenses as virtual asset trading platforms. OSL CEO Hugh Choi stated: "Holding a license is not just about complying with regulations, but also about ensuring the highest security standards and investor protection."
#CeFi #Asset Management #Hedge Fund
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Year Established: 2019
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Website: maicapital.io
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Basic Introduction: MaiCapital is a hedge fund service provider specializing in blockchain and cryptocurrency investments. The company is licensed by the SFC to conduct Type 9 (Asset Management) and Type 4 (Securities Advising) regulated activities in Hong Kong. Its flagship product, the Blockchain Opportunity Fund, is a multi-strategy hedge fund employing quantitative trading and arbitrage strategies.
MaiCapital’s fund management business is licensed under Type 9 and also holds a Type 4 investment advisory license. Additionally, compared to traditional asset management, crypto assets carry unique risks. Therefore, if a licensed asset manager wishes to hold virtual assets exceeding a certain proportion in its portfolio, it must undergo an "uplift" based on its Type 9 license and submit additional reports to the SFC to obtain approval. In 2022, the Securities and Futures Commission (SFC) of Hong Kong permitted MaiCapital to manage portfolios with up to 100% virtual assets.
#Infrastructure #Layer1 #real-world assets (RWA)
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Year Established: 2020
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Website: mantrachain.io
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Financing: USD 11 million, led by Shorooq Partners
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Basic Introduction: MANTRA aims to become the first Layer 1 blockchain for real-world assets (RWA) capable of complying with and enforcing real-world regulatory requirements. By accelerating the adoption of tokenized RWAs, MANTRA has the potential to unlock a USD 16 trillion RWA economy through a regulation-ready blockchain. Through the MANTRA Chain compliance framework, TradFi companies can easily switch to and leverage asset tokenization and blockchain solutions, thereby promoting the global growth of RWAs.
Applications built on MANTRA Chain benefit from a compliant environment where they can build and access regulated digital assets, fostering a transparent ecosystem. By obtaining the first financial license in the UAE, MANTRA positions itself at the forefront of the rapidly developing RWA industry in the Middle East and Asia. Its goal for 2024 is to tokenize a diverse portfolio of assets, including real estate, private market funds, private equity, art, and government bonds. Additionally, on August 13, 2024, the High Court of Hong Kong ordered key figures involved in the MANTRA DAO project to disclose financial records in response to allegations of asset misappropriation and unauthorized control.
Of course, there are many other Web3 projects established in Hong Kong, such as CrossSpace and Kikitrade in the SocialFi sector, Forkast in media, TokenPocket and HyperPay in the wallet sector, Linear Finance and Wombat Exchange in DeFi, Animoca Brands and Artifact Labs in the NFT sector, and the incubator Brinc, among others.
* Image source: Foresight News
Hong Kong’s regulation of virtual currencies generally exhibits a dual characteristic of "strict regulation and promoted development." For areas that may pose systemic risks, such as virtual asset trading platforms and security tokens, Hong Kong has adopted strict regulatory measures. In areas encouraging innovation, such as DeFi and non-security tokens, it has demonstrated a relatively lenient regulatory attitude.
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Regarding virtual asset trading platforms:The Securities and Futures Commission (SFC) of Hong Kong requires virtual asset trading platforms to obtain a license issued by the SFC to operate legally. This means that any platform providing virtual asset trading services in Hong Kong must comply with the SFC’s stringent requirements, including but not limited to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
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Regarding security tokens:If virtual assets are deemed security tokens (i.e., possessing characteristics of traditional securities, such as equity or dividends), they will be subject to securities regulations. Projects offering these tokens need to obtain relevant securities licenses and comply with the regulatory standards of the Hong Kong securities market.
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Additionally, regarding stablecoins:The Hong Kong Monetary Authority (HKMA) and the SFC are developing a specific regulatory framework for stablecoins, particularly for those pegged to fiat currencies. Issuers are required to obtain licenses and adhere to strict regulatory provisions to ensure market transparency and investor safety.
Of course, the Hong Kong government supports innovation in Web3 technology, blockchain, and virtual assets, striving to build Hong Kong into Asia’s hub for virtual assets and fintech. Therefore, the government maintains a certain degree of inclusiveness towards some non-security tokens and Decentralized Finance (DeFi) projects. Hong Kong has launched a "regulatory sandbox" program, allowing fintech companies to test their innovative products and services in a limited environment. This mechanism enables companies to make innovative attempts while under regulation.
Overall, Hong Kong has adopted an "inclusive yet prudent" attitude towards virtual currency regulation, encouraging innovation while emphasizing risk prevention. For Web3 entrepreneurs, Hong Kong is a favorable location for establishment.
