What Is a Hong Kong Virtual Asset Custodian License?

What is a Hong Kong virtual asset custodian license? It is a proposed license category in Hong Kong that would regulate institutions that, as a business in Hong Kong, safeguard on behalf of clients the instruments that can be used to transfer virtual assets (including private keys), with licensing and supervision by the SFC. The regime was first proposed in a consultation paper in June 2025. The Financial Services and the Treasury Bureau (FSTB) and the SFC published the consultation conclusions on December 24, 2025, and the government plans to introduce a bill to the Legislative Council in 2026 to amend the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The licensing regime has not yet taken effect.

Which Institutions Need to Apply for a Custodian License?

The test is whether an institution can unilaterally transfer clients’ virtual assets. According to the consultation conclusions, associated entities of licensed virtual asset trading platforms, licensed corporations for Type 13 regulated activity, banks and subsidiaries of locally incorporated banks, stored value facility licensees, and fund managers that hold the private keys to fund virtual assets themselves all need a license if they safeguard private keys for clients. The HKMA is the frontline regulator for banks and stored value facility licensees.

Four categories are proposed for exemption: institutions regulated by the SFC or HKMA for which custody is merely incidental and that do not hold private keys; companies that provide custody only for group companies; lawyers and accountants that hold key backups for clients or are appointed by a court; and licensed stablecoin issuers that only custody the stablecoins they issue.

On licensing requirements, the proposals set minimum paid-up share capital of HK$10 million and minimum liquid capital of HK$3 million (except for banks). Applicants, substantial shareholders, and personnel with direct access to private keys or the authority to initiate or approve transfers must all pass fit and proper assessments. Custody standards will be based on the existing client asset custody requirements for trading platforms, with hot and cold wallets, insurance or compensation arrangements, key management and independent audits all within the scope of the SFC’s consideration.

How Does the Custodian License Relate to the VATP License?

The VATP license has been in effect since June 1, 2023, and licensed trading platforms must hold client assets through associated entities. Once the new regime takes effect, these associated entities will need to obtain a separate custodian license to continue providing custody. The SFC has also said it will require licensed virtual asset dealers to place client assets with SFC-regulated custodians.

Do MPC and Wallet-as-a-Service Providers Need a Custodian License?

It depends on whether clients can access their assets on their own without the service provider. According to the consultation conclusions, as long as clients can complete transfers on their own and can reconstruct the full private key or recover their assets without the MPC provider’s cooperation, the provider does not need a license. Conversely, if the provider leaves clients no means of recovery and clients cannot unilaterally transfer assets, the provider may be regarded as a custodian. Non-custodial wallet providers that have no ability to transfer assets themselves generally fall outside the regulatory scope.

This is consistent with the approach to whether Wallet-as-a-Service requires a license: what matters is who can control the assets, not what technology is used.

When Will the Custodian License Take Effect?

The effective date depends on the legislative timetable, and there will be no transitional period. The consultation conclusions make clear that existing custodians will not receive “deemed licensed” treatment, and the regime will apply in full on the day the relevant legislation takes effect. Providing custody services without a license may be punishable by a fine of up to HK$5 million and imprisonment for seven years.

Institutions already providing custody should engage with the SFC or HKMA as early as possible. Associated entities of trading platforms, banks and subsidiaries of locally incorporated banks that have already been assessed by the SFC or HKMA and are already providing custody can use an expedited approval process.

Conclusion

The Hong Kong virtual asset custodian license brings the business of safeguarding private keys for clients under its own licensing regime, with the core test being whether an institution can unilaterally transfer client assets. The regime still awaits legislation but will have no transitional period, so institutions that provide or plan to provide custody services in Hong Kong need to prepare capital, personnel and custody controls in advance.