On December 15, OSL Exchange, operated by BC Technology Group (863.HK), announced it had received the first virtual asset trading license from the Securities and Futures Commission (SFC) of Hong Kong. The license covers Type 1 (Securities Dealing) and Type 7 (Providing Automated Trading Services) regulated activities, marking a historic milestone in Hong Kong’s journey toward regulated digital asset trading.
This development formalizes what was initially signaled in August 2020, when the SFC expressed in-principle approval for OSL Digital Securities to obtain the license. Beyond Hong Kong, OSL has also formally applied for a digital asset license under Singapore’s Payment Services Act with the Monetary Authority of Singapore (MAS), indicating its regional expansion strategy.
👉 Discover how global financial hubs are shaping the future of crypto regulation.
Regulatory Framework: What the License Means
According to the SFC’s November 6, 2019 position paper, any online platform offering at least one security token for trading falls under its jurisdiction and must hold both Type 1 and Type 7 licenses. These classifications are not new to traditional finance:
- Type 1 (Securities Dealing) allows firms to act as brokers or dealers in securities, including stocks, bonds, mutual funds, and unit trusts.
- Type 7 (Automated Trading Services) permits the operation of electronic trading systems that match buy and sell orders.
To qualify, applicants must have at least two responsible officers with relevant experience or qualifications, be incorporated in Hong Kong (or a registered foreign company), and maintain proper governance structures. This ensures that only well-capitalized, professionally managed entities enter the market.
Target Market: Exclusively for Professional Investors
One of the most significant aspects of OSL’s license is its restriction to professional investors only. Retail participation is not permitted under this framework. The eligibility criteria are strict:
- Individuals must have an investment portfolio worth at least HK$8 million (~USD 1.03 million).
- Corporations or partnerships must have assets of at least HK$40 million (~USD 5.15 million).
- Trusts must manage no less than HK$40 million in assets.
For mainland Chinese investors, additional requirements apply: possession of a Hong Kong bank account and the use of Hong Kong dollars for transactions. This creates a high barrier to entry but aligns with the SFC’s risk-mitigation approach.
The definition of "professional investor" under Hong Kong law includes individuals, corporations, trusts, and family-owned investment vehicles meeting specific wealth thresholds—ensuring that only sophisticated participants access these markets.
Security, Compliance & Investor Protection
OSL emphasizes that its platform will enable trading in high-quality digital assets, including Bitcoin (BTC), Ethereum (ETH), and rigorously vetted Security Token Offerings (STOs). To ensure integrity:
- All users undergo strict Know Your Customer (KYC) and anti-money laundering (AML) checks.
- The platform employs advanced market surveillance tools to detect manipulation and insider trading.
- Client funds are safeguarded through segregated custody solutions.
- Hot and cold wallets are insured against theft or loss.
- Fiat and crypto assets are kept in separate accounts to prevent commingling.
Additionally, clients benefit from both traditional investor protection mechanisms and new safeguards introduced by the SFC specifically for virtual assets—such as mandatory audits, capital adequacy requirements, and transparent disclosure standards.
How Hong Kong Stands Out in Asia
While Japan and Singapore have established comprehensive legal frameworks for crypto businesses, Hong Kong has taken a different path: integrating digital asset platforms into its existing financial regulatory structure rather than creating standalone legislation.
Key features of Hong Kong’s virtual asset regulatory model include:
- Exclusive access for professional investors
- Support for STO issuance and trading
- Mandatory segregation of fiat and crypto holdings
- Insured digital asset custody
- Full compliance with KYC/AML protocols
- Access to SFC oversight and dispute resolution channels
This pragmatic approach allows regulators to leverage proven financial controls while adapting them to the unique risks of blockchain-based assets.
Other Players in the Race
While OSL leads the pack, other major exchanges are making moves:
- Huobi (1611.HK) disclosed it obtained a Trust or Company Service Provider license, along with Type 4 (advising on securities) and Type 9 (asset management) licenses.
- OKEx (1499.HK) revealed its subsidiary secured a Hong Kong trust company registration certificate.
However, these are not virtual asset trading licenses. They fall under traditional financial services and do not permit crypto spot trading. As noted by Wu Shuo Blockchain, Huobi and OKEx primarily serve retail markets. To comply with Hong Kong’s virtual asset rules, they would need to significantly restructure their business models—potentially abandoning mass-market appeal in favor of institutional-grade compliance.
👉 Explore how institutional adoption is reshaping the crypto landscape.
Regional Context: Singapore’s Move Into Crypto
Just five days before OSL’s announcement, on December 10, DBS Bank, backed by Singapore’s sovereign wealth fund Temasek, launched its own digital exchange. It supports trading between four fiat currencies (SGD, USD, HKD, JPY) and four major cryptocurrencies (BTC, ETH, BCH, XRP), along with institutional-grade custody services.
BC Technology Group also entered into a service agreement with DBS Bank to provide technical support—an early sign of cross-market collaboration between regulated players in Asia’s financial hubs.
Could Beijing Follow Hong Kong’s Lead?
Given the close coordination between Beijing and Hong Kong’s financial authorities—evident in initiatives like the Shanghai Stock Exchange STAR Market, which drew inspiration from Hong Kong’s IPO reforms—there is growing speculation about whether mainland China might adopt similar frameworks.
While the People’s Bank of China continues to prohibit cryptocurrency issuance (such as ICOs) and reinforces bans on crypto trading domestically, there have been nuanced shifts:
- Discussions around including certain token offerings under securities law.
- Recognition of Bitcoin as a "virtual commodity" rather than legal tender.
- Development of the digital yuan (e-CNY) as a state-backed alternative.
These suggest a cautious openness to regulated digital assets—even if direct retail access remains off-limits.
👉 Learn how policy evolution could unlock new opportunities in digital finance.
Frequently Asked Questions
Q: Who can trade on OSL after receiving the license?
A: Only professional investors meeting minimum asset thresholds—HK$8 million for individuals and HK$40 million for institutions.
Q: Is retail crypto trading allowed in Hong Kong?
A: Not yet. The current SFC framework restricts licensed platforms to professional investors only.
Q: What cryptocurrencies does OSL support?
A: Bitcoin (BTC), Ethereum (ETH), and selected Security Token Offerings (STOs) that pass rigorous due diligence.
Q: How does Hong Kong regulate crypto compared to Singapore?
A: Unlike Singapore’s dedicated Payment Services Act, Hong Kong applies existing financial licenses (Type 1 & 7) to crypto platforms within an adapted regulatory framework.
Q: Can mainland Chinese investors use OSL?
A: Yes, but only if they meet professional investor criteria, hold a Hong Kong bank account, and transact in HKD.
Q: Will China adopt Hong Kong’s crypto model?
A: While full adoption is unlikely soon, Beijing may study Hong Kong’s approach when considering future regulations on digital assets or security tokens.
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