Author: Bai Zhen, Mankun Blockchain Legal Services
In the evolving landscape of virtual assets, clarifying regulatory terminology is critical for industry participants. Hong Kong’s Virtual Asset Service Provider (VASP) and Virtual Asset Trading Platform (VATP) are often conflated but serve distinct roles under local law.
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Key Definitions
Virtual Assets in Hong Kong
Per the 2022 Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance (AMLAO), virtual assets are:
- Cryptographically secured digital representations of value (e.g., cryptocurrencies, governance tokens).
- Excludes central bank digital currencies, limited-use tokens, and traditional securities.
Why It Matters: AMLAO’s "non-security" scope triggers dual regulation under both AMLAO and the Securities and Futures Ordinance (SFO) for licensed entities.
Virtual Asset Service Providers (VASP)
Scope: Broad category covering:
- Asset managers & advisors
- Custodians & wallet providers
- ICO service providers
Activities Include:
✅ Virtual-to-fiat exchanges
✅ Asset transfers & custody
✅ Investment services
Regulatory Focus:
- Risk management frameworks
- Client disclosures
- Operational integrity
Virtual Asset Trading Platforms (VATP)
Definition: Subset of VASPs specializing in:
- Trading virtual assets
- Providing liquidity & custody
Licensing Requirements:
- SFC Type 1 License (securities trading) if listing security tokens.
- SFC Type 7 License (automated trading services).
Note: Decentralized or peer-to-peer platforms fall outside current SFC oversight.
Compliance Takeaways
VATP vs. VASP:
- VATP = High-risk (strict security/AML rules).
- Other VASPs = Focused on transparency & risk mitigation.
Dual Regulation:
- Align with SFO (securities) + AMLAO (non-securities).
Tailored Strategies:
- Match compliance measures to specific services offered.
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FAQ Section
Q1: Can a VATP operate without an SFC license?
A: Only if it exclusively handles non-security tokens and complies with AML/CFT rules.
Q2: Are decentralized exchanges (DEXs) regulated as VASPs?
A: Currently, no—Hong Kong’s framework targets centralized platforms.
Q3: What’s the penalty for non-compliance?
A: Fines up to HKD 5 million and/or imprisonment under AMLAO.
Disclaimer: This article is informational and does not constitute legal/financial advice. Consult local regulations for compliance.
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