AI summaryCurrently, the trading assets that securities brokers can offer to Hong Kong retail investors are limited to BTC and ETH.
Currently, the trading assets that securities brokers can offer to Hong Kong retail investors are limited to BTC and ETH.
Since the Securities and Futures Commission of Hong Kong (SFC) held a briefing for applicants of virtual asset trading platforms on June 12, every move made by virtual currency exchanges—whether those successfully licensed, deemed licensed, or those withdrawing their applications for clearance—has attracted significant attention. In this regard, many crypto media outlets and analysts have shared their views and analyses. Mr. Liu Honglin, Managing Partner of Mankun Law Firm, also accepted an exclusive interview with the Web3.0 media outlet DeThings. For details, please see:Mankun Updates | Exclusive Interview with Lawyer Liu Honglin by DeThings: Are Hong Kong Virtual Currency Exchanges "Cleared but Not Withdrawn"?。
On June 17, according to a flash news report released by Wusuo, a well-known domestic Web3 media outlet,Tiger Brokers announced that it had been approved for a license upgrade and would formally provide crypto trading services to retail investors across Hong Kong.In response, Mankun Law Firm collected opinions from several senior Web3.0 lawyers regarding "the relevant progress in the SFC's licensing issuance" and "whether Tiger Brokers' licensure indicates a gradual opening of virtual currency trading in our country," and hereby shares these insights.
Founder of Mankun Law Firm
According to the relevant regulations of the SFC, after June 1, 2024, all virtual asset trading platforms operating in Hong Kong must be licensed by the SFC or be applicants "deemed licensed"; otherwise, operating in Hong Kong constitutes a criminal offense. Meanwhile, applicants "deemed licensed" will not engage in significant marketing activities targeting individual clients, as they remain key subjects of SFC supervision, which could affect their formal approval.
Currently, Tiger Brokers has upgraded from "deemed licensed" status to fully licensed status, which is why it has formally announced the provision of crypto trading services to Hong Kong retail investors. However, it is worth noting thatunder China's existing regulatory policies, virtual currency exchanges are prohibited from operating in China or serving Chinese citizens.According to the "Notice on Further Preventing and Disposing of Risks Related to Virtual Currency Trading and Speculation" (Yin Fa [2021] No. 237) issued by ten ministries and commissions on September 15, 2021, it is explicitly stated that overseas virtual currency exchanges providing services to residents within our country via the internet constitute illegal financial activities. Relevant domestic staff of such overseas virtual currency exchanges, as well as legal persons, unincorporated organizations, and natural persons who knowingly or should have known that they were engaged in virtual currency-related businesses yet still provided services such as marketing, payment settlement, or technical support, shall be held legally accountable. Therefore, even though Tiger Brokers has obtained a formal license from the SFC,it still cannot provide virtual asset trading services to users in mainland China.。
At the same time, other trading platforms that have withdrawn their licenses or failed in their applications, even if they hold compliance licenses issued by specific countries or regions, are subject only to the laws of those jurisdictions. Holding a license in another country does not equate to authorization to conduct business globally. Therefore, virtual currency exchanges holding only qualified licenses from other countries still cannot conduct virtual currency exchange business targeting mainland China or Hong Kong, China.
Cross-Border Team, Mankun Law Firm
Compared to established local Hong Kong securities firms like Shengli Securities, mainland residents are obviously more familiar with internet-based securities firms like Tiger Brokers, as many mainlanders have used Tiger Brokers to trade US and Hong Kong stocks. However, the legality of Tiger Brokers providing US and Hong Kong stock investment services to mainland China has long been a subject of concern. According to the relevant regulations of the China Securities Regulatory Commission (CSRC), any institution providing securities trading services to residents within mainland China must obtain the corresponding license. However, Tiger Brokers and similar internet securities firms clearly do not hold mainland financial licenses, making the compliance of such practices a gray area.Although this model is currently operational, the potential compliance risks cannot be ignored.。
Now that Tiger Brokers has obtained a license from the SFC and can formally provide crypto investment services to Hong Kong users, whether it will continue its previous precarious approach of opening US and Hong Kong stock markets to mainland residents, thereby creating a channel for mainlanders to buy and sell virtual currencies (currently limited to BTC and ETH for retail investors),remains unknown. We can only say: stay tuned.。
Cross-Border Team, Mankun Law Firm
Tiger Brokers recently officially announced its license upgrade, allowing it to open virtual asset trading to Hong Kong retail investors. Its trading process typically involves:The securities broker opens an omnibus account (a consolidated client account) at a licensed exchange (currently only OSL and HashKey), and then executes virtual asset transactions on behalf of each client at the licensed exchange according to their instructions.。
In fact, as early as last November, Shengli Securities and Interactive Brokers were respectively approved to provide virtual asset trading and advisory services to retail investors. As securities brokers, they already held SFC Type 1 licenses (Dealing in Securities) and Type 4 licenses (Advising on Securities); this recent development involved what is known as a "license upgrade."
Compared to virtual asset exchanges, securities brokers receive less public attention, but they are actually closer to retail investors, especially traditional investors. Ordinary retail investors can achieve one-stop trading services for stocks, bonds, futures, options, funds, virtual assets, and other instruments through a single securities broker APP they are accustomed to using.
It is worth noting that, according to regulatory requirements, licensed exchanges can only provide trading services for "eligible large-cap virtual assets" (currently only BTC and ETH) to Hong Kong retail investors, which is a much narrower range than the types of virtual assets available to professional investors. Therefore, the aforementionedsecurities brokers can currently offer retail investors trading assets limited to BTC and ETH only.We look forward to Hong Kong opening up more virtual assets for investor trading in the future.
Special Declaration:
This article is an original work of Mankun Law Firm. It represents only the personal views of the author and does not constitute legal consultation or legal advice on specific matters.
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