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The case involves substantive litigation that could yield important legal principles for the treatment of decentralised projects.

By Dominic Geiser, Simon Hawkins, Sam Maxson, and Truman Mak

Decentralised autonomous organisations (DAO) are unique structures that operate autonomously in accordance with preset rules, utilising a blockchain and coordinated through a distributed consensus model. Whilst numerous DAOs are operating in the blockchain industry, these organisations are still new in legal terms and their precise legal status (including ownership and…

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The government will enact the new legislation to bring issuers of fiat-referencing stablecoins into the regulatory perimeter.

By Simon Hawkins, Adrian Fong, and Sam Maxson

On 17 July 2024, the Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority (HKMA) released the consultation conclusions on their legislative proposal for a regulatory regime governing stablecoin issuers in Hong Kong (Consultation Conclusions). The next day, the HKMA followed with its own press release announcing the first batch…

Implementation of Basel Committee cryptoassets standard to provide additional clarity for banks looking to engage in cryptoassets business.

By Simon Hawkins and Adrian Fong

On 7 February 2024, the Hong Kong Monetary Authority (HKMA) released a consultation paper on its proposal for implementing new regulations on the prudential treatment of cryptoasset exposures (Consultation Paper).

The Consultation Paper comes shortly after the Financial Services and the Treasury Bureau and the HKMA issued a consultation paper in December 2023 outlining their legislative proposal for a regulatory regime governing stablecoin issuers in Hong Kong (see this Latham blog post). On 20 February 2024, the HKMA also published guidance on digital asset custody services and sale and distribution of tokenised products conducted by banks. Together, these papers offer guidance and greater certainty to banks interested in providing digital asset services (including digital asset issuance, custody, and dealing services).

This blog post summarises the proposed regulations set out in the Consultation Paper as well as next steps for banks, known in Hong Kong as authorised institutions (AI).

Initial Coin Offering

The proposed regulatory framework would create substantive obligations on issuers of fiat-referencing stablecoins to safeguard the public.

By Simon Hawkins and Adrian Fong

On 27 December 2023, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) released a consultation paper on their legislative proposal for a regulatory regime governing stablecoin issuers in Hong Kong (Consultation Paper). The HKMA followed with its own press release announcing a future sandbox arrangement for stablecoin issuers.

This blog post summarises the proposed Hong Kong regulatory framework set out in the Consultation Paper, and next steps for stablecoin issuers who may fall within scope of the proposed regime.

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Revamped SFC and HKMA guidance applies to intermediaries that distribute products or provide dealing, advisory, and asset management services related to virtual assets.

By Simon Hawkins and Adrian Fong

On 20 October 2023, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) issued a joint circular (Joint Circular) to provide updated guidance to intermediaries conducting virtual asset (VA) activities. The Joint Circular revises a previous joint circular issued on 28 January 2022 (see Latham’s Client Alert).

The need to update the 2022 joint circular emerged after a new regulatory regime for virtual asset trading platforms (VATP) was launched in June 2023, which allowed such platforms to onboard retail investors (see Latham’s Client Alert) for the first time.

The regulatory perimeter continues to expand as the Securities and Futures Commission introduces a comprehensive regime to regulate virtual asset service providers.

By Simon Hawkins and Adrian Fong

In December 2022, Hong Kong passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (Amendment Bill), which will establish a new licensing regime and statutory framework for virtual asset service providers from 1 June 2023. Initially, the Amendment Bill will apply to anyone operating a centralised virtual asset trading platform in Hong Kong or actively marketing such services to the Hong Kong public.

This is the first decision by the Hong Kong Court on whether clients of a crypto exchange have proprietary claims to cryptocurrencies held on the platform. It confirms that cryptocurrency constitutes property under Hong Kong law.

By Dominic Geiser, Simon Hawkins, Howard K. H. Lam, Adrian Hei-Yin Fong, Flora F. W. Innes, and Tsun Ming (Truman) Mak

In a recent landmark decision of Re Gatecoin Limited [2023] HKCFI 914 involving a Hong Kong cryptocurrency exchange in liquidation, the Hong Kong Court of First Instance expressly confirmed for the first time that cryptocurrency is “property” under Hong Kong law and can be held on trust. This decision aligns Hong Kong with the position in other major common law jurisdictions.

The court also found, based on the facts and circumstances of this particular case, that the cryptocurrency exchange did not hold assets on trust for its customers under its latest applicable terms and conditions, thereby rendering such customers unsecured creditors, rather than beneficiaries, of the exchange.

Hong Kong’s licensing regime for virtual asset service providers to take effect in March 2023.

By Simon Hawkins, Adrian Fong, and Shirley Wong

On 24 June 2022, the Hong Kong government gazetted the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (Amendment Bill). The Amendment Bill proposes changes to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615) (AMLO) in order to introduce a licensing regime for virtual asset service providers (VASP) and impose statutory anti-money laundering and counter-terrorist financing (AML/CTF) obligations on the VASP sector.

The SFC issued a statement to clarify its regulatory approach in relation to non-fungible tokens and remind investors of related risks.

By Simon Hawkins, Farhana Sharmeen, Adrian Fong, Gen Huong Tan and Shirley Wong

On 6 June 2022, the Hong Kong Securities and Futures Commission (SFC) issued a statement drawing attention to the risks associated with investing in non-fungible tokens (NFTs) and summarising the legal and regulatory requirements applicable to NFTs.

This follows recent guidance from Hong Kong’s banking, securities, and insurance regulators to financial institutions looking to undertake virtual asset activities (see Latham’s Client Alert Hong Kong’s New Crypto Regulatory Framework to Facilitate Greater Institutional Participation). Together, the statement and guidance demonstrate that the regulators are continuing to look closely at the digital asset space.

Hong Kong’s Securities and Futures Commission introduces new licensing regime to regulate previously unregulated markets and restates expectations regarding security token offerings.

By Simon Hawkins, Kieran Donovan, and Kenneth Y.F. Hui

The second day of Hong Kong Fintech Week again brought together regulators and market participants from across the fintech industry for a range of insightful discussions.

Ashley Alder, Chief Executive Officer of the Securities and Futures Commission (SFC), delivered the day’s biggest headline in his keynote speech, announcing that the Financial Services and Treasury Bureau (FSTB) would be issuing a consultation paper proposing a new licensing regime for virtual asset service providers (VASPs), effectively creating a legal framework that brings previously unregulated activities within the SFC’s regulatory perimeter. (Further analysis is available in Latham’s Client Alert on the proposed framework.)