How to legally buy and sell virtual currencies in Hong Kong?

The following article is from lawyer Jin Jianzhi and the author is Jin Jianzhi

Virtual currency is a very embarrassing existence in China. Because of some regulatory issues, friends who buy and sell virtual currency in China have all kinds of worries, how to find a trustworthy way to deposit funds, how to withdraw money safely without being frozen cards, how to seek judicial remedies after disputes, how to explain the source of virtual currency to the public security organs... But in Hong Kong, none of the foregoing is too much of a problem, and virtual currencies are a completely "sunny" topic. In Hong Kong, there are many ways you can legally buy and sell virtual currency.

01

Virtual currency exchanges

As of the date of publication of this article, there are currently two companies that have obtained the Hong Kong Virtual Asset Service Provider License (VASP License): Hashkey, OSL, and one HKVAX that has been approved in principle.

In short, Hashkey and OSL are two licensed exchanges approved by the Hong Kong Securities and Futures Commission, users can directly register an account, top up funds, place orders to buy and sell, withdraw funds to buy and sell virtual currencies on the exchange platform, and do not have to worry too much about anything that damages the rights and interests of investors, because every move of the exchange is under the supervision of the SFC, and users can also complain to the SFC at any time and report the exchange's violations.

However, according to the regulatory requirements of the Hong Kong Securities and Futures Commission, in order to protect the rights and interests of investors, there are also differences in the types of virtual currencies that professional investors and retail investors can buy. Taking Hashkey Exchange as an example, there are 4 types of accounts to open an account with Hashkey: retail investors (commonly known as retail investors), individual professional investors (investment portfolios of not less than HK$8 million or equivalent in foreign currencies), corporate professional investors (portfolios of not less than HK$8 million or equivalent in foreign currencies or total assets of not less than HK$40 million or equivalent in foreign currencies), institutional professional investors, retail investors can only buy BTC, Fiat trading pairs of mainstream cryptocurrencies such as ETH, while professional investors can trade and access all virtual currency pairs on the exchange with stablecoins.

02

Over-the-counter (OTC) trading

Virtual currency OTC merchants, i.e., institutions or individuals that provide over-the-counter (OTC) trading services. OTC trading refers to the buying and selling of cryptocurrencies on platforms or channels other than exchanges, usually involving cash or other fiat currencies. OTC transactions come in the following forms:

·  Online platform: Through websites, social media, chat software and other network tools, connect buyers and sellers, and provide matchmaking, custody, clearing and other services.

·  Offline stores: Cash-for-crypto or vice versa in physical stores usually don't require real-name authentication or other compliance requirements.

·  ATM: A self-service device set up in a public place where you can buy or sell cryptocurrencies with cash or a bank card.

According to a rough estimate based on preliminary on-the-ground observation by Hong Kong law enforcement agencies, there are about 200 physical virtual asset OTC trading shops (including those operated by ATMs) in operation in Hong Kong, and about 250 virtual asset trading service providers actively providing services on the Internet. Money changers are a significant part of over-the-counter crypto trading, accounting for a major portion of the $64 billion in digital assets flowing through Hong Kong as of June, according to a Chainalysis survey.

In the offline stores and ATMs of most OTC merchants, KYC is generally not required, and the transaction is a simple hand-to-hand payment of money and hand-over of virtual currency, which only takes a few minutes to complete, which provides a convenient, flexible and private transaction method for cryptocurrency users, especially welcomed by mainland users.

It is worth mentioning that on February 2, 2024, Hong Kong's Secretary for Financial Services and the Treasury, Christopher Hui, said that the Hong Kong government believes that there is a need to bring OTC into regulation. Buying and selling virtual currencies over the OTC will become much safer for users. Any violation of laws and regulations of the OTC can also be directly complained and reported to the regulatory authorities.

（图片来源TokenInsight）

03

Brokerage

A-share investors must be familiar with the process of opening accounts for stock trading on the Shenzhen Stock Exchange and the Shanghai Stock Exchange through major brokerages. Similarly, buying and selling virtual currencies in Hong Kong can also be done through a broker. In fact, more and more Hong Kong brokerages are also developing cryptocurrency business, including: Futu Securities, Tiger Brokers, Victory Securities, Interactive Brokers, South China Securities, Long Bridge Securities, Fortune Securities, Quam Development Securities, etc.

Among them, Victory Securities, a Hong Kong-listed company and a veteran Hong Kong brokerage, has been approved by the Hong Kong Securities and Futures Commission to provide virtual asset trading and advisory services to retail investors. In short, traditional brokerage users can buy and sell virtual currencies through the brokerage platform. According to an interview with Chen Peiquan, executive director of Shengli Securities, Shengli Securities will soon launch an app that "combines the trading experience of traditional finance, such as stocks and bonds, with the trading experience of virtual currency, allowing customers to allocate all kinds of assets they need on a single platform." That is to say, stock speculation and coin speculation will achieve seamless connection.

According to the official website of Victory Securities, mainland residents only need to provide the following information to open an account with Victory Securities, of which the less easy is a Hong Kong bank account and an overseas address certificate within 3 months. After opening an account, you can buy and sell mainstream virtual currencies with fiat currency through a brokerage.

(Image source: Victory Securities official website)

04

brief summary

As the legal status of virtual assets in more and more countries and regions is recognized, the legal participation channels and methods of virtual asset investors are gradually enriched. I hope the summary of this article can provide reference and suggestions for relevant friends. It should be reminded that as a Chinese citizen, you should still comply with the relevant regulations of the mainland in the process of asset entry and exit, and if you have further consultation on the compliance allocation of virtual currency, you can contact Mankiw's lawyer.

Original creator: lawyer Jin Jianzhi