Hong Kong Has ‘Around 10’ Fund Managers Gone Crypto — But More Are Expected

Hong Kong has seen a small spike in interest from fund managers looking to handle crypto for their clients.

Local managers in charge of funds with 10% gross asset value in digital assets need to apply for an upgrade to their necessary “Type 9” license. Until now, interest has been fairly muted. 

Only 10 fund managers across Hong Kong have upgraded their licenses to manage crypto since the Securities and Futures Commission (SFC) issued guidance in 2019, Michael Wong, partner at law firm Dechert, told Blockworks.

Interest appears to be rising, with three or four of that cohort upgrading in the last six months. Wong expressed the licensing application with the SFC is now a lot smoother and shorter than in the past.

“The SFC is more comfortable granting the ‘virtual asset license upgrade’ to fund managers nowadays, as long as the fund managers have requisite experience and expertise, and appoint appropriate service providers including trading platforms, custodians, fund administrators and auditors,” he said.

Interest in Hong Kong’s crypto future has likely been spurred to its business-friendly environment, low tax rates, quality workforce and geographic proximity to mainland China. Wong noted that the SFC is now allowing managers to invest in a larger universe of digital assets and establish more complex products focused on Web3.

“We expect more fund managers to upgrade their licenses in the future,” Wong said. “Fund managers are increasingly looking to set up their business in Hong Kong and obtain the relevant licenses to manage virtual assets and conduct fundraises from investors.”

Hong Kong wants another run at being a crypto hub

Hong Kong’s government has pledged a renewed focus on growing the local crypto sector and local regulators have signaled a willingness to cooperate. 

It seems to be working: the city-state’s largest digital bank earlier this month announced plans to service locally-regulated crypto exchanges with fiat on- and off-ramps. 

Hong Kong’s High Court also recently deemed crypto to be property in a landmark ruling, bringing clarity on certain legal aspects moving forward.

Local regulators, however, still restrict the types of digital asset funds allowed to operate. “For example, it is unclear whether the SFC would grant a license to a manager who manages VC funds that directly invest in blockchain projects that receive returns in newly minted tokens or virtual assets,” Wong said.

In any case, regulatory developments in Hong Kong appear positive at a time when the US, by contrast, is still navigating regulations for its local crypto economy.

“The Hong Kong government is living up its pledge to open up the virtual asset industry to provide Hong Kong with a competitive edge as a virtual asset hub in the Asia region,” Wong said.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• The Drop: Apps, games, memes and more.
• Lightspeed: All things Solana.
• Supply Shock: Bitcoin, bitcoin, bitcoin.