With regard to the management of portfolios (or portions of portfolios) that directly invest in virtual assets, the SFC currently regulates:

1. Licensed corporations licensed for Type 9 regulated activity, which, in addition to managing portfolios which solely invest in securities, futures contracts or both, manage or plan to manage:
   1. Portfolios that invest solely in virtual assets; or
   2. Portfolios that invest partially in securities, futures contracts or both and partially in virtual assets; and
2. Licensed corporations licensed for Type 1 regulated activity which manage or plan to manage collective investment schemes solely investing in non-security or futures contract virtual assets and distribute or plan to distribute the same in Hong Kong.

The SFC regulates the above virtual asset fund managers through the imposition of terms and conditions (VAFM Terms and Conditions) on their licences. Based on the “same business, same risks, same rules” principle, the VAFM Terms and Conditions set out regulatory requirements derived from existing regulatory requirements applicable to SFC-licensed fund managers (eg the Fund Manager Code of Conduct) but which are adapted to address the specific risks posed by virtual assets.

With respect to the management of portfolios (or portions of portfolios) that invest less than 10% of the gross asset value of the portfolio (the de minimis threshold) or indirectly invest in virtual assets (eg a fund of funds which invest in virtual assets), the SFC regulates these fund managers under the existing SFO regime for Type 9 regulated activity.

In relation to virtual asset discretionary account management services, the SFC will also impose the VAFM Terms and Conditions on the licences of licensed corporations providing these services which exceed the de minimis threshold on a portfolio basis.

Where a Type 1 intermediary is authorised by its clients to provide VA dealing services on a discretionary basis as an ancillary service (ie such activities are performed wholly incidental to an intermediary’s provision of services in Type 1 regulated activity), the intermediary should not exceed the de minimis threshold on a portfolio basis when investing in virtual assets on behalf of each of its clients.

Intermediaries licensed or registered for Type 1 and/or Type 4 regulated activities may provide virtual asset dealing and/or advisory services to their existing clients.

The SFC regulates these intermediaries through the imposition of terms and conditions (VA Dealing or Advisory Terms and Conditions) on their licences. Based on the “same business, same risks, same rules” principle, the VA Dealing or Advisory Terms and Conditions set out regulatory requirements derived from existing regulatory requirements applicable to intermediaries conducting dealing and advisory activities in securities, but which are adapted to address the specific risks posed by virtual assets.

To provide adequate investor protection, intermediaries may only partner with SFC-licensed virtual asset trading platforms (SFC-licensed platforms) for the provision of virtual asset dealing services, whether by way of introducing clients to the platforms for direct trading or establishing an omnibus account with the platforms.

The SFC regulates intermediaries distributing virtual asset-related products under the existing SFO regime. All existing requirements governing the sale of investment products, including the complex product regime, apply to the distribution of virtual asset-related products.