Contents

License Introduction
1. Background and Motivation
II. Regulatory Development Timeline
III. Detailed explanation of the proposed regulatory and licensing framework
IV. Application Period
Transition plan
Transition plan details
Service Introduction
Customer type
About us
FAQ

1. Background and motivation for the regulation of the virtual currency OTC market in Hong Kong

As a global financial center, Hong Kong has actively promoted the standardization of the virtual assets (VA) industry in recent years to attract international investment and ensure financial stability. From June 2023, 6, the Securities and Futures Commission (SFC) implemented a licensing system for Virtual Asset Trading Platforms (VATPs) to regulate the operations of centralized exchanges in accordance with the Anti-Money Laundering and Anti-Terrorism Financing Ordinance (AMLO). However, the over-the-counter (OTC) market, due to its decentralization, flexibility and relative privacy, has become the focus of regulatory loopholes.

OTC transactions typically involve direct exchange of virtual assets for legal currency, or peer-to-peer transactions through intermediaries, and are common in physical stores, online platforms, or transactions between individuals. In 2023, there were many OTC-related fraud cases in Hong Kong. For example, scammers used OTC services to mislead investors into transferring funds to unlicensed platforms, involving risks such as money laundering and illegal fundraising. These events have prompted the government to recognize the urgency of bringing the OTC market into a regulatory framework to protect investors, prevent illegal activities and align with international anti-money laundering standards.
To this end, the Financial Services and the Treasury Bureau (FSTB) of Hong Kong issued a consultation document on February 2024, 2, proposing that OTC virtual asset trading services be included in the scope of AMLO supervision and be supervised by the Hong Kong Customs and Excise Department (CED), similar to the existing regulatory model of Money Service Operators (MSOs). This move aims to supplement the VATPs regulatory framework and achieve comprehensive standardization of the virtual asset market.

II. Regulatory Development Timeline

Date progress
November 2023, 6 The SFC officially implemented the VATPs licensing system, requiring centralized virtual asset trading platforms to obtain a license and comply with AML/CFT requirements.
November 2024, 2 The FSTB has published a consultation document entitled “Proposals for Regulating OTC Virtual Asset Spot Trading Services”, which is open for public comments until April 2024, 4, outlining preliminary plans for the OTC regulatory framework.
November 2024, 4 The consultation period has concluded and the FSTB has received feedback from industry and the public on issues including the scope of licences, exemption arrangements and transition period.
November 2024, 9 No final legislative proposal has yet been submitted to the Legislative Council, and the legislative process is still in the process of integrating opinions and perfecting details.
November 2025, 2 The SFC released the "ASPI-Re" regulatory roadmap, confirming the introduction of an OTC virtual asset trading licensing framework to ensure consistency with VATPs regulatory standards. Legislation for the virtual asset custody system is planned to be completed by the end of 2025, but the timetable for the OTC framework is unclear.
As of March 2025, 5 The OTC licensing system has not yet been implemented and is expected to be submitted to the Legislative Assembly as an AMLO amendment. The specific legislative progress and implementation date have not been announced.

III. Detailed explanation of the proposed regulatory and licensing framework

Based on the February 2024 consultation document and subsequent progress, below are the details of the regulatory framework for OTC virtual asset trading services, divided into key aspects such as licensing scope, application requirements, operating restrictions, exemption arrangements, transition period and cross-border applicability.

1. Regulatory bodies and scope of licence

  • regulatory agency :
    • Hong Kong’s Customs and Excise Department (CED) will be responsible for supervising OTC virtual asset trading service providers, similar to its regulatory responsibilities for MSOs.
    • The CED will establish a licensing approval process to ensure that service providers comply with AML/CFT and investor protection requirements.
    • The SFC may provide technical support, particularly in collaboration with the Hong Kong Monetary Authority (HKMA) on virtual asset classification and stablecoin regulation.
  • Scope of License :
    • Definition：OTC virtual asset trading services refer to businesses that provide spot transactions between virtual assets and legal currencies, or act as an intermediary to facilitate such transactions, whether through physical stores, online platforms or other means.
    • Suitable :
      • An entity (including an individual, company or branch) that provides OTC trading services in Hong Kong.
      • Entities operating outside Hong Kong that actively market OTC services to the Hong Kong public, for example through unsolicited communications, broad media advertising or internet promotions targeting Hong Kong investors.
    • transaction type: Limited to the exchange of virtual assets for legal tender, or the exchange of legal tender for virtual assets, and excluding direct conversion between virtual assets (the latter must be operated in the form of VATPs).

2. Application and operation requirements

  • Local Presence :
    • Applicants must register a company or branch in Hong Kong and have an actual operating location (physical or online) for CED to conduct inspections and enforcement.
    • Registration requirements ensure that regulators can effectively monitor business operations and prevent "shell companies" from circumventing regulation.
  • code of conduct :
    • Compliance Management :
      • Appoint at least one compliance officer who is responsible for ensuring that the business complies with regulatory requirements and has knowledge of the virtual asset industry.
      • Appointment of Money Laundering Reporting Officers (MLROs) who are responsible for monitoring suspicious transactions and reporting to the Joint Financial Intelligence Unit (JFIU).
    • AML/CFT requirements :
      • Perform Customer Due Diligence (CDD), including identity verification and source of funds checks.
      • Keep transaction records for at least 5 years to ensure traceability.
      • Conduct risk assessments to identify and manage money laundering and terrorist financing risks.
    • Robust operation :
      • Ensure sound and prudent business operations, including financial stability and internal controls.
      • Provide clear transaction disclosures to ensure clients understand transaction fees, risks, and terms.
      • Misleading advertising or high-pressure sales tactics are prohibited.
  • skills requirement :
    • Ensure the security of transaction systems and prevent data leakage or cyber attacks.
    • If virtual asset transfer is involved, a secure blockchain wallet must be used and the ownership or control of the customer's wallet must be verified.

3. Restrictions and Prohibited Activities

To reduce risks and be consistent with VATPs regulation, the proposed framework sets strict limits on the scope of business of OTC service providers:
  • Prohibited Activities :
    • Direct conversion between virtual assets: For example, to directly exchange Bitcoin for Ethereum, it is necessary to operate in the form of VATPs and obtain SFC permission.
    • Investment advice or recommendations: Personalized or broad virtual asset investment advice may not be provided.
    • Derivatives trading: It is prohibited to provide virtual asset futures, options or other derivatives transactions.
    • Staking: It is not allowed to provide virtual asset pledge services to obtain profits.
    • Loans or financing: It is prohibited to provide virtual asset-related loans, leverage or financing services.
    • Custody or Escrow Services: Only short-term holding that is unavoidable during the transaction process (such as waiting for transaction confirmation) is allowed, and no long-term custody or wallet management services are allowed.
  • Restricted virtual assets :
    • OTC transactions are limited to:
      • Virtual assets with large market capitalization (such as Bitcoin, Ethereum, etc.) listed on SFC-licensed VATPs.
      • Stablecoins issued by stablecoin issuers licensed by the HKMA (such as regulated USD stablecoins).
    • This restriction is intended to reduce the risks of trading niche or highly volatile virtual assets, while aligning with the HKMA’s stablecoin regulatory framework.
  • Remittance service :
    • If it involves transferring virtual assets to a customer's blockchain wallet, the customer's ownership or control of the wallet must be verified (for example, through signature verification).
    • Providing remittance services (including the transfer of fiat currency or virtual assets) requires a separate application for an MSO license and compliance with existing MSO regulatory requirements.

4. Exemption Arrangements

To avoid duplication of regulation, the proposed framework provides exemptions for the following entities:
  • bank：If a licensed bank provides OTC virtual asset trading services, it does not need to apply for a CED license separately as it is already regulated by the HKMA.
  • SFC Licensed Company：Securities firms or asset management companies that have obtained SFC licenses do not need additional licenses if their OTC services fall within the scope of existing licenses.
  • VATPs：A virtual asset trading platform that has obtained an SFC license does not need to apply for a CED license if it provides OTC services.
  • Stablecoin issuers(Potential)**: If the HKMA licenses stablecoin issuers in the future, these entities may be exempted, depending on the final legislation.
The exemptions are intended to simplify the compliance process and encourage regulated entities to participate in the virtual asset market, but exempted entities are still required to comply with AML/CFT and other applicable requirements.

5. License period and transitional arrangements

  • License period :
    • The permit is valid for 2 years and can be renewed for another 2 years upon expiry.
    • Renewal requires demonstration of continued compliance with regulatory requirements, including financial condition, compliance record and operational soundness.
  • Transitional Period :
    • 6-month transition period: After the new system comes into effect, existing OTC service providers will have six months to adapt to the new requirements.
    • 3 months application period: Service providers must submit a license application to CED within the first 3 months of the transition period.
    • 4 Month Closure Period: Service providers who fail to apply for a license within three months must close their business before the end of the fourth month.
    • Compliance Operations: After submitting the application, the service provider can continue to operate until the CED makes a licensing decision, but must comply with interim compliance requirements (such as AML/CFT).
    • new entrant: After the system comes into effect, no OTC service may be provided without permission.
The transitional arrangements are designed to balance the urgency of regulatory implementation with the industry’s need to adapt, in particular by providing small service providers with time to adjust.

6. Cross-border applicability

The proposed framework has significant cross-border applicability to foreign entities that actively market OTC services to the Hong Kong public:
  • Active Marketing Definition :
    • Unsolicited communications (such as phone calls, emails or instant messages).
    • Advertisements targeted at Hong Kong investors through the broad media (TV, radio, newspapers) or the Internet.
    • Participate in exhibitions or promotional activities in Hong Kong to attract local customers.
  • regulatory requirements :
    • If overseas service providers actively promote their services in Hong Kong, they need to register a branch in Hong Kong and apply for a CED license.
    • Even if there is no Hong Kong entity, if its services actually affect Hong Kong investors, CED can hold it accountable through international cooperation or law enforcement actions.
  • Enforcement Challenges :
    • Cross-border supervision involves identifying the marketing practices of foreign entities and may require cooperation with international regulators.
    • Technical challenges include monitoring online ads and the anonymity of blockchain transactions.
Cross-border applicability reflects Hong Kong’s concern about the risks in the global virtual asset market and is consistent with the international standards of the Financial Action Task Force (FATF).

7. Legislative process

  • Legislative form :
    • The proposed framework will be implemented through an amendment to AMLO to add OTC virtual asset trading services as regulated activities.
    • The amendment bill needs to be submitted to the Hong Kong Legislative Council for deliberation and approval, involving public consultation and committee review.
  • Current status :
    • As of May 2025, 5, no final legislative proposal has been submitted to the Legislative Council.
    • The SFC’s ASPIRe roadmap (2025 February 2) confirms plans for OTC regulation but does not provide a specific legislative timeline.
    • Based on the progress of the VA custody system (expected to be completed by the end of 2025), the OTC framework may enter the legislative stage in the second half of 2025 to early 2026.
  • Anticipated challenges :
    • The legislative process may be delayed by industry feedback and technical details such as stablecoin regulatory integration.
    • There is a need to balance regulatory stringency with market innovation, especially in attracting international businesses.

IV. Transition Alternatives

1. Trust VA Account

  • Before the launch of the Hong Kong OTC virtual asset trading license,Trust Bank VA AccountIt is a common solution for OTC Desk. OTC Desk uses the ability of trust companies (or trust banks) to open virtual asset accounts (VA accounts) to simplify the flow of funds and exchange virtual currencies (such as Hong Kong dollars to USDT) by directly signing purchase and sale contracts with customers.
  • Trust Function Limitation: This scheme does not use the full functions of the trust (such as long-term asset custody or trust property management), but uses the trust company as a compliant entity to open a VA account to facilitate the flow of funds and ensure transaction compliance.
  • Feasibility verification :
    • Legality: Trust companies are regulated by the Trust Companies Regulations, are eligible to open VA accounts, and comply with AMLO’s AML/CFT requirements. The sales contract signed with the customer complies with Hong Kong Contract Law.
    • Market Application：About 15-20% of large OTC Desks adopt this solution, especially serving high-net-worth clients and cross-border capital flows in the mainland, with clear cooperation cases with VASPs such as HashKey and OSL or local trust companies.
    • technical feasibility：The trust company's VA account is integrated with the Hong Kong banking system, with efficient fund flow and support for Faster Payment System (FPS) and bank transfers.
  • Mode of operation :
    • The OTC Desk works with a trust company to receive client funds through a VA account opened by the trust.
    • The customer signs a purchase and sale contract with the OTC Desk to specify the details of the virtual currency exchange, and the funds and assets are traded within the VA account.
    • Transactions are subject to strict KYC/AML to ensure compliance and reduce money laundering risks.
  • market situation：This solution is widely favored by high-end customers (especially mainland customers) due to its convenient capital flow and high compliance, but it is relatively costly and has a penetration rate of about 15-20%.
  • Risks and Challenges: High operating costs, cross-border compliance risks, and uncertainty about future regulation. The 2023 JPEX case highlights the risk of fraud in the OTC market and emphasizes the importance of KYC/AML.
  • Conclusion：Trust bank VA account is a mature alternative to OTC Desk, which uses the compliance of trust companies to simplify the flow of funds and is suitable for large and cross-border transactions, but it is necessary to pay close attention to regulatory changes before the license is implemented in 2026.

2. Third-party channel

  • Mode of operation :
    • Utilize VASP licenses in Europe (such as Malta, Estonia), Singapore or Switzerland to process OTC transactions through overseas entities to circumvent the regulatory gap in Hong Kong.
    • transaction process :
      1. OTC operators set up physical stores or online platforms in Hong Kong as customer docking windows.
      2. Client funds are transferred to the bank account of an offshore licensed entity (usually in Singapore or Europe).
      3. The overseas entity exchanges the virtual assets and transfers them to the customer’s wallet to complete the transaction.
      4. Overseas entities implement KYC/AML in compliance with local regulatory requirements.
    • Common license plate areas :
      • Singapore: The Monetary Authority of Singapore (MAS)’s Payment Services Act (PSA) license covers virtual asset exchanges.
      • Malta：Virtual Financial Assets Act (VFA) license, with low application cost.
      • Estonia：The VASP license has a low threshold and is suitable for small businesses.
      • Switzerland: FINMA license, serving high-end customers.
  • Case :
    • A Hong Kong OTC chain store cooperated with a licensed VASP in Singapore to handle large-scale USDT exchanges through a Singapore entity. The Hong Kong store is only responsible for cash collection and customer docking.
    • 2024 Techub News reported that some OTC operators use Malta licenses and claim to comply with international AML standards, but have not disclosed operational details.
  • Market characteristics :
    • Coverage: About 10-15%, mostly large operators serving cross-border customers.
    • target customers：Mainland customers (to avoid mainland supervision) and high net worth customers (requires overseas bank accounts).
    • Advantage :
      • Avoid local regulatory gaps and reduce the risk of card freezing.
      • It has high cross-border efficiency and is suitable for mainland capital flows.
      • International licenses enhance customer trust.
    • challenge :
      • Cross-border compliance risks: The FSTB Consultation Paper (2024) requires overseas entities that actively market to Hong Kong to apply for a local license.
      • High cost: License application and maintenance fees are hundreds of thousands of Hong Kong dollars.
      • Difficulty of law enforcement: It is difficult for the Hong Kong CED to supervise overseas entities, increasing the risk of money laundering.
  • Actual situation :
    • There is a strong demand for third-party channels among mainland customers, especially for USDT exchange.
    • About 10% of large chain stores and online platforms adopt this solution, while small and medium-sized businesses rarely use it due to cost constraints.

3. Physical stores that are not specifically regulated

  • Mode of operation :
    • About 200 physical stores (such as One Satoshi, VBIT OTC、Crypto HK) provides cash or bank transfer exchange for virtual assets (BTC, USDT, ETH), similar to a currency exchange shop.
    • Some shops hold a Money Service Operator (MSO) license issued by the CED and are required to implement KYC (such as identity verification for transactions above HKD 12) and AML/CFT.
  • Case :
    • One Satoshi：10+ branches in Hong Kong (Mong Kok, Causeway Bay, etc.), public MSO license, support large-amount USDT exchange, voluntary KYC and monitoring of suspicious wallets.
    • VIT OTC: Located in Tsim Sha Tsui, it provides fast exchange, emphasizes privacy and offers large transaction discounts.
  • Market characteristics :
    • Coverage: 40-50%, mainstream retail solution.
    • target customers：Local non-technical users (older), mainland customers (cash transactions).
    • Advantage :
      • Quick (completed in minutes), cash accepted.
      • Low cost and highly competitive exchange rate.
      • It is widely used and covers many areas.
    • challenge :
      • High risk of fraud and money laundering (JPEX case shows shops being abused).
      • Some small stores do not have KYC and have low compliance.
  • Actual situation :
    • Physical stores are the mainstream choice for local and mainland customers, especially for small transactions.
    • Large chains voluntarily comply and cooperate with the JFIU to report suspicious transactions.

4. Online platforms that are not specifically regulated

  • Mode of operation :
    • About 250 platforms match buyers and sellers through websites, Telegram, WhatsApp, etc., and funds flow through fast transfer processing (FPS) or bank transfer.
    • Some platforms voluntarily implement KYC (such as uploading ID cards), but the standards vary.
  • Case :
    • Crypto HK：Plans to apply for future licenses and provide USDT exchange through Telegram.
    • International platforms (such as Binance P2P) are used by a small number of Hong Kong users and are not mainstream locally.
  • Market characteristics :
    • Coverage: 30-40%, suitable for high-frequency trading.
    • target customers：Young users, mainland customers (cross-border exchange).
    • Advantage :
      • High flexibility, supporting multiple payment methods.
      • The operation is simple and suitable for small transactions.
    • challenge :
      • The information is not transparent and there are many hidden costs.
      • There is a lack of supervision and the risk of fraud is high.
  • Actual situation :
    • Online platforms are popular among young users because of their convenience, but their levels of compliance vary.
    • Some platforms have been investigated for involvement in fraudulent funds (as reported in 2024).

5. Cryptocurrency ATM

  • Mode of operation :
    • Dozens of ATMs (Mong Kok, Causeway Bay, etc.) support cash exchange for BTC/ETH without KYC (some require mobile phone verification).
    • Some of them are from OTC stores (such as One Satoshi).
  • Market characteristics :
    • Coverage: 5%, auxiliary program.
    • target customers：Small traders and occasional users.
    • Advantage: Instant transactions, simple operation.
    • challenge: High handling fees (tens to hundreds of Hong Kong dollars) and high risk of money laundering.
  • Actual situation :
    • ATMs are not widely used and are only provided as supplementary services in stores.

6. Compliant OTC services from licensed VASPs

  • Mode of operation :
    • SFC licensed VASPs (such as HashKey and OSL) provide compliant OTC services. Funds flow through Hong Kong banks and require strict KYC/AML.
    • Supports the exchange of Hong Kong dollars for virtual assets, and the transaction records are transparent.
  • Case :
    • HashKey OTC：Cooperate with Standard Chartered Bank to support USDT exchange and serve retail and institutional customers.
    • O.S.L.：Provide RFQ (Request for Quote) OTC, focusing on high net worth clients.
  • Market characteristics :
    • Coverage: 10-15%, compliant market.
    • target customers：Institutional clients and retail users with strong compliance awareness.
    • Advantage：SFC supervision, low risk and high transparency.
    • challenge: High handling fees (0.5-1%) and low flexibility.
  • Actual situation :
    • After the JPEX case, VASP The share of OTC services has increased, attracting compliant customers.

7. How the U Card Scheme works

As a virtual asset prepaid card, U Card combines Web3 payment functions to provide a convenient alternative to OTC transactions. The following is the detailed operation process:
  1. Cooperation structure :
    • OTC Desk or online platform cooperates with U card issuer, who may be:
      • Licensed VASP：Such as HashKey, providing compliant VA accounts and blockchain wallet services.
      • payment institution：Like a licensed money service operator (MSO) in Hong Kong, it supports fiat currency top-ups.
      • Web3 Platform：Such as the PayFi project in the Solana ecosystem, issuing U cards and integrating stablecoins (such as USDT).
    • The issuer generates a U card through a blockchain wallet (such as Ronin) and links it to the user's virtual asset account.
  2. transaction process :
    • Step 1: User Registration and KYC :
      • Users in OTC Register at the desk or online platform and submit KYC information (such as ID card, address proof).
      • Issuers perform AML checks to screen for high-risk customers (e.g. suspicious source of funds).
    • Step 2: Recharge U card :
      • Users top up Hong Kong dollars to the U Card via Faster Payment System (FPS) or bank transfer, and the funds are deposited into the issuer’s bank account (such as Standard Chartered).
      • The U card balance is stored in the form of legal currency or virtual assets (such as USDT), depending on the issuer's settings.
    • Step 3: Sales contract or transaction confirmation :
      • Users and OTC Sign a purchase and sale contract at the Desk (or click to confirm through the platform), specify the exchange currency (such as USDT), amount and handling fee (0.5-3%).
      • The contract references market exchange rates (such as CoinMarketCap) to ensure transparency.
    • Step 4: Exchange or spend virtual currency :
      • exchange：U card balance is converted into virtual assets and transferred to the user's wallet (such as MetaMask).
      • 消费: U card supports online shopping, cross-border payments (such as e-commerce and game recharge), and directly deducts the balance.
      • Transactions are confirmed via the blockchain in seconds.
    • Step 5: Withdraw or reverse transaction :
      • Users transfer virtual assets back to the U card, convert them into Hong Kong dollars and withdraw them to their bank accounts.
      • The issuer verifies the transaction to ensure there is no risk of money laundering.
    • Step 6: Recording and Reporting :
      • Issuers keep transaction records for 5 years, in compliance with AMLO requirements.
      • Report suspicious transactions to JFIU to reduce enforcement risks.
  3. Technical support :
    • Blockchain Wallet：U card is based on high-performance blockchains such as Solana and Ronin, with low transaction fees (0.01-0.1 USDT/transaction).
    • Stablecoin Integration：USDT is the main trading currency, ensuring value stability and suitable for cross-border payments.
    • Bank Links：The issuer cooperates with Hong Kong banks (such as HSBC) to support efficient transfers, and the FPS limit meets small and medium-sized transactions.
    • Safety measures：Multi-signature wallets and Chainalysis monitoring ensure asset security and compliance.
  4. Case :
    • Local Cases：An online OTC platform (anonymous) cooperated with the Solana ecosystem U card issuer. The user recharged 10 Hong Kong dollars to the U card, exchanged it for USDT and transferred it to the Ronin wallet. The transaction was completed in 3 minutes.

Customer service type

Asset Management Institutions

Asset Manager

Lending Institutions

loan provider

Exchange

cryptocurrency exchange

traditional finance

Traditional Financial

Brokerage Institutions

broker-dealer

OTC institutions

OTC provider

business planning

Conducting overseas financial business requires comprehensive planning

Corporate Framework

資金
  • Total treasury requirements
  • Liquidity requirements
  • Regulatory agencies’ external requirements
  • Are the funds already overseas?
Background of shareholders and directors
  • Suitable person
  • Industry background
  • Reputation and qualifications
  • Do Hong Kong/offshore license companies need to increase?
Professionals
  • Company person in charge
  • Professional staff (RO)
  • Other financial professionals: sales, compliance, settlement, etc.
  • Do the personnel match the business needs?
Office location
  • Business Location
  • Separation of front office, back office and back office in compliance with regulatory requirements
  • Connections to exchanges
  • Purchase office furniture

Corporate Compliance

license
  • What is the operating area itself?
  • The various laws and regulations that media business must comply with and the Securities and Futures Commission
  • Various periodic and prudent declarations

! The Jingbiantong team will assist customers in making the most appropriate plans and provide corresponding services in various fields according to their actual background and business needs.

About us

Aiying's subsidiary Chronovate Law was founded in 2018 and was formerly known as Triton Protocol. It is committed to providing excellent legal services to visionary companies and leading the future of technology and innovation.
As a boutique law firm, we provide unparalleled personalized service at a specialized scale. Chronovate is not only a legal advisor, but also a strategic partner of its clients, deeply connecting with their operations and vision to build long-term cooperation with mutual success as the core.
We specialize in Web3, blockchain, fintech and innovation, making us the legal partner of choice for startups and industry leaders. We provide comprehensive solutions ranging from corporate law, intellectual property to cross-border transactions and regulatory compliance, and are particularly good at trust bank VA account compliance strategies for Hong Kong OTC virtual asset transactions.
Chronovate embraces the Web 3.0 revolution, adopts a digital-first model, and uses blockchain technology to improve service transparency and efficiency. This global perspective reduces operating costs and benefits clients by providing top-notch consulting at competitive prices.
In the face of the new Hong Kong OTC license policy in 2026 (FSTB 2024), Chronovate is in close discussions with members of the Hong Kong Legislative Council to enable clients to thrive in the global change and create lasting cooperation with regulatory foresight and market insights.

FAQs

  • operation flow :
    1. OTC Desk works with licensed trust companies in Hong Kong (or trust banks, such as HSBC’s trust division) to open virtual asset accounts (VA accounts), usually with SFC licensed VASPs (such as HashKey Exchange, OSL) integration.
    2. The customer registers and submits KYC information (ID card, proof of address, source of funds), and the trust company performs an AML check.
    3. Customers and OTC The desk signs a purchase and sale contract, specifying the currency (such as USDT), exchange rate (refer to CoinMarketCap), handling fee (0.5-2%) and delivery time (T+0 or T+1).
    4. Customers deposit Hong Kong dollars into the trust VA account via FPS or bank transfer, OTC The Desk transfers funds from its virtual asset inventory to the customer wallet to complete the exchange.
    5. The reverse transaction (virtual assets against Hong Kong dollars) is also carried out through the VA account, and the funds are transferred to the customer's bank account.
  • Trust Company Role：Provide compliant VA accounts as funding channels to ensure that the flow of funds complies with the KYC/AML requirements of the Anti-Money Laundering and Counter-Terrorism Financing Regulations (AMLO). Trust companies do not perform full trust functions (such as asset management) and only act as transaction intermediaries.
  • Case：Some OTC Desk cooperates with HashKey and local trust companies. Customers deposit 100 million Hong Kong dollars into the VA account and exchange it for USDT within 5 minutes. The funds flow through Standard Chartered Bank and the transactions are transparent.
  • Legality :
    • Trust companies are regulated under the Trust Companies Ordinance (Cap. 29) and are eligible to open VA accounts in accordance with current laws.
    • VASPs (such as HashKey) are regulated by the SFC and AMLO and provide compliant transaction channels.
    • The sales contract complies with the Contracts Ordinance (Cap. 26) and the transaction terms are clear and legally binding.
  • Anti-Money Laundering Compliance :
    • The trust company performs KYC (identity verification, source of funds) and AML checks, using tools such as Chainalysis to screen suspicious wallets.
    • Suspicious transactions are reported to the Joint Financial Intelligence Unit (JFIU) in compliance with AMLO requirements.
  • Current regulatory status :
    • Without a dedicated OTC license, the scheme relies on the existing regulatory framework for trust companies and VASPs to operate legally.
    • The 2024 FSTB consultation document proposes an OTC license (expected to be implemented in 2026), which requires registration in Hong Kong, and the existing scheme needs to be adjusted to meet the new requirements.
  • Case：HashKey's VA account service complies with SFC supervision, cooperates with trust companies to ensure AML compliance, and has high market recognition.
As of May 2025, 5, Hong Kong has not yet officially launched a dedicated licensing system for virtual currency OTC transactions. The Financial Services and the Treasury Bureau (FSTB) published a consultation document on February 20, 2024, proposing that OTC transactions be brought under the regulatory scope of the Anti-Money Laundering and Anti-Terrorism Financing Ordinance (AMLO), to be supervised by the Hong Kong Customs and Excise Department (CED). A licensing system is expected to be implemented in 2, requiring OTC service providers to register in Hong Kong and comply with AML/CFT requirements. Currently, the OTC market relies mainly on indirect constraints from existing laws, such as money service operator (MSO) licenses and anti-fraud laws.
  • customer groups :
    • Local retail customers: Older, non-technical users prefer physical stores (such as One Satoshi), while younger users use online platforms.
    • Mainland customers: Due to card freezing and regulatory restrictions in the Mainland, USDT is exchanged through Hong Kong OTC to conduct cross-border capital flows.
    • High Net Worth/Institutional Clients: Prefer trust bank VA accounts or VASP OTC services, and focus on compliance and security.
  • Transaction requirements :
    • Hong Kong dollars are exchanged for mainstream virtual assets (such as USDT, BTC, ETH), with USDT accounting for the largest proportion (due to its stability and cross-border applications).
    • Large transactions (hundreds of thousands to millions of Hong Kong dollars) require high compliance and fund security.
    • Cross-border capital flows, especially capital transfers from the mainland to Hong Kong or international markets.
  • Fraud risk: The 2023 JPEX case (loss of HK$17 billion) showed that unregulated OTCs are easily exploited by fraud gangs.
    • response: Choose an OTC Desk that cooperates with a licensed trust company or VASP to keep transaction records and contracts.
  • money laundering risk: In 2025, PANews reported that Southeast Asian gangs used OTC to launder money, making cross-border capital flows difficult to regulate.
    • response：Implement strict KYC/AML and use tools such as Chainalysis to screen suspicious wallets.
  • regulatory risk: Future licenses may restrict temporary storage and cross-border sales, and existing plans need to be adjusted.
    • response：Prepare license applications in advance and cooperate with local trusts/VASPs to reduce risks.
  • Fund security：Small OTC Desks may have their funding chain broken or run away.
    • response: Use your personal wallet to verify the bank link of your VA account (such as Standard Chartered).
  • Utilization method :
    • Exchange USDT through a trust bank VA account, and transfer funds from a mainland bank to a Hong Kong VA account, and then to a virtual asset wallet.
    • Using third-party channels (such as Singapore licenses) or unregulated shops, with funds flowing through overseas banks or cash transactions.
  • Special risks :
    • Mainland Supervision: Violation of foreign exchange controls (US$5 annual limit) may result in account freezing or investigation.
    • Money laundering concerns: Hong Kong CED may launch an AML investigation due to the high-frequency flow of mainland funds.
    • Fraud risk：Mainland customers are easily misled by promises of high returns, and most of the victims in the JPEX case are mainland users.
  • response：Choose a compliant OTC Desk (such as cooperating with HashKey), disclose the source of funds, and keep transaction receipts.
  • market integration：Small OTC Desks may exit due to high compliance costs (KYC/AML systems, license fees), and the market will be concentrated on large chains (such as One Satoshi) and VASPs (such as HashKey).
  • Compliance Improvement: Unified supervision will reduce the risks of fraud and money laundering and enhance investor confidence.
  • Cross-border challenges: Mainland capital flows require stricter AML checks, and CED may cooperate with mainland regulators.
  • Trust Bank VA Account：It will remain competitive due to its compliance advantages, but it will need to apply for a local license and adjust its custody functions.
  • scope of influence：Some OTC service providers (such as One Satoshi) holds a Money Services Operator (MSO) license issued by the CED and is subject to existing AML/CFT requirements. In the future, OTC licenses will serve as an independent regulatory framework, and MSO license holders will need to apply for a new license if they provide virtual asset exchanges.
  • Transitional arrangements：The FSTB consultation document (2024) proposes a six-month transition period, and MSO holders must apply for an OTC license within three months, otherwise their virtual asset business will be terminated.
  • Compliance Advantages：MSO holders are already familiar with the KYC/AML process and may find it easier to meet OTC license requirements, but they need to upgrade their technology (such as blockchain monitoring) to meet the unique risks of virtual assets.
  • monitoring mechanism :
    • Transaction Report: CED requires OTC service providers to report suspicious transactions (such as high-frequency large-value transfers and no clear source of funds) to the Joint Financial Intelligence Unit (JFIU).
    • Blockchain Analysis：Cooperate with Chainalysis, Elliptic, etc. to track the flow of virtual assets and identify wallets related to money laundering.
    • Bank cooperation：Hong Kong banks (such as Standard Chartered) monitor OTC-related accounts, and abnormal fund flows trigger AML investigations.
  • Enforcement measures :
    • Regular inspections: CED conducts on-site or remote audits of OTC stores and online platforms to verify KYC records.
    • Cross-border collaboration: Share intelligence with the Mainland’s State Administration of Foreign Exchange, Singapore’s MAS, etc. to track mainland capital flows.

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