Introduction

Hong Kong has taken a defining step in the race to become Asia’s leading hub for regulated digital-asset finance. Under the strengthened 2024–2025 Securities and Futures Commission regime, the city has approved its first fully licensed virtual asset investment fund. The approval allows the manager to invest across a spectrum of digital assets, including tokenised real-world assets, certain regulated stablecoins and specific categories of virtual assets that satisfy Hong Kong’s stringent suitability and custody standards.

This development is more than a regulatory milestone. It signals Hong Kong’s intention to compete directly with Singapore, Japan and the United Arab Emirates for institutional Web3 activity. It also demonstrates that high-quality regulatory frameworks can coexist with innovation, attracting global capital that demands both exposure to digital markets and the protection of robust oversight.

For founders, asset managers, investors and global structuring teams, Hong Kong’s licensing breakthrough marks a shift in market dynamics. This Insight examines what the approval means for virtual-asset management, how it differentiates Hong Kong from competing jurisdictions and how Web3 projects can position themselves in this evolving landscape.

Insight / Analysis

1. What the New SFC Approval Means

The licence represents Hong Kong’s first fully compliant virtual-asset fund under the new regime. The SFC has clarified that the manager may invest in:

• tokenised real-world assets
• regulated stablecoins
• eligible crypto assets traded on licensed venues
• other virtual assets that meet liquidity, custody, valuation and governance standards

This goes beyond previous permissions, which were limited to professional investors, highly restricted portfolios or hybrid models. The approval introduces a new class of regulated digital-asset fund that may, over time, become accessible to a broader investor base as the regulatory framework matures.

1.1 A New Benchmark for Asia

Singapore has tightened areas of digital-asset regulation. Japan continues to impose strict token-listing requirements. Dubai’s VARA regime attracts exchanges, yet institutional fund management remains conservative. Hong Kong is positioning itself to fill the gap: a regulated jurisdiction that permits sophisticated exposure to virtual assets while maintaining institutional-grade standards.

1.2 Why the SFC Is Taking This Step Now

The licensing shift is driven by several factors:

• rising demand from institutional managers seeking regulated exposure
• global appetite for tokenised assets and stable-value instruments
• political intent to restore Hong Kong’s role as an international financial centre
• the need to offer clarity after years of reluctance and risk aversion

The SFC has now concluded that risk can be managed, provided that asset managers implement stronger governance, custody, valuation and audit processes.

2. Key Regulatory Elements of Hong Kong’s Virtual-Asset Fund Regime

2.1 Mandatory Segregated Custody

Custody is central to Hong Kong’s approach. Funds must store client assets with licensed custodians that meet requirements for:

• cold storage and multi-signature controls
• insurance coverage for digital-asset custody
• segregation of client and house assets
• continuous risk assessment
• independent oversight and record keeping

The custody model reflects a deliberate move away from crypto-native practices toward institutional norms.

2.2 Tight Token Admission Criteria

Fund managers may not hold any digital asset they choose. Tokens must satisfy tests relating to:

• market depth and liquidity
• governance and transparency
• exchange venue licensing
• smart-contract audit status
• operational resilience
• regulatory classification

This places real-world operational constraints on managers but provides risk clarity for investors.

2.3 Stablecoin Regulation Matters

Hong Kong requires stablecoins to comply with local authorisation rules. The fund may only hold stablecoins that:

• are fully backed
• have transparent reserves
• satisfy local disclosure obligations
• maintain redemption mechanisms

This makes stablecoin selection part of regulatory compliance, not just portfolio construction.

2.4 Suitability and Risk-Management Standards

Managers must:

• assess investor suitability
• maintain independent risk and compliance functions
• monitor liquidity and market-manipulation risk
• implement enhanced AML controls
• maintain valuation models compatible with virtual-asset volatility

The SFC has effectively merged traditional asset-management expectations with digital-asset technical requirements.

3. Why This Matters for Global Web3 Capital Markets

3.1 Hong Kong Becomes a Gateway for Tokenised Assets

Tokenised real-world assets are gaining traction across Asia. A licensed fund that can invest in these instruments provides an institutional route into tokenised markets. This supports the growth of tokenisation platforms, custody providers and secondary-market infrastructure.

3.2 Institutional Capital Prefers Regulated Environments

Large asset managers avoid unregulated jurisdictions. By offering formalised licensing pathways, Hong Kong positions itself as an institutional bridge between traditional finance and Web3. This has implications for:

• liquidity
• market depth
• price stability
• investor confidence
• cross-border distribution

3.3 Competitive Advantage Over Singapore and Others

Singapore remains cautious about retail access to crypto. Japan’s token approval process is slow. Dubai prioritises exchanges rather than funds. Hong Kong is the first in Asia to strike a balance that satisfies both investors and regulators.

3.4 Clearer Structuring Options for Web3 Foundations and SPVs

Hong Kong’s licensing environment supports:

• fund management entities
• token-treasury vehicles
• STO and tokenisation platforms
• structured investment products
• cross-border corporate groups involving BVI or Cayman entities

This makes it an appealing jurisdiction for projects that want regulatory credibility without abandoning global flexibility.

Application

1. Implications for Web3 Founders

Founders considering Hong Kong should evaluate:

• whether their token would meet the SFC’s due-diligence standards
• whether token stability, liquidity and governance are sufficient for institutional holding
• whether their project benefits from a Hong Kong-based investment or treasury vehicle
• how SFC custody requirements align with their existing infrastructure

Well-designed governance and transparency frameworks make listing more achievable.

2. Implications for Investors and Fund Managers

Institutional investors should consider:

• onshore exposure to tokenised assets
• diversification via regulated digital-asset products
• improved counterparty risk compared to offshore exchanges
• full clarity on custody, insurance and auditing

Fund managers may now explore Hong Kong as a base for digital-asset strategies previously out of reach.

3. Implications for Global Structuring and Offshore Entities

Projects operating through BVI, Cayman or Dubai structures can integrate a Hong Kong entity as:

• a regulated fund vehicle
• an asset-management arm
• a compliant gateway for Asian investors
• a treasury management hub

This blends offshore flexibility with onshore regulatory credibility.

Strategic Recommendations

1. Conduct a token eligibility assessment to determine whether your asset could be held by a licensed Hong Kong fund.
2. Develop institutional-standard governance, including treasury policies, disclosures, audits and board oversight.
3. Align your custody and operational workflows with Hong Kong’s regulatory expectations.
4. Consider establishing a Hong Kong advisory or asset-management entity to build a compliant presence in Asia.
5. Coordinate cross-border structuring between offshore entities and Hong Kong-based regulated functions to ensure clarity and compliance.

Conclusion

Hong Kong’s approval of its first fully licensed virtual-asset fund signals a turning point for regulated digital-asset finance in Asia. It confirms that the city is not merely reopening to Web3, but actively reshaping itself into a global centre for institutional virtual-asset investment. The message is clear. High-quality regulation, when designed with understanding and precision, attracts capital rather than repels it.

At Humlor, we help Web3 founders, institutional investors and global structuring teams navigate this evolving landscape. We design governance, licensing and operational frameworks that align innovation with regulatory expectation, allowing your ecosystem to grow with stability, clarity and global legitimacy.