Our work

1. Advising crypto platforms on the licensing requirements for operating in Hong Kong or providing services to Hong Kong investors, including:

Assessing the scope of a platform’s business, advising on whether it needs to be licensed in Hong Kong in order to operate or service Hong Kong investors, and if so on the requirements for licensing;
Assistance with applications for licensing: (i) as a Virtual Asset Service Provider (VASP) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), and (ii) for regulated activities Type 1 (dealing in securities) and Type 7 (providing automated trading services) under the Securities and Futures Ordinance’s (SFO) including:
- where necessary, setting up a Hong Kong corporation to be the licensed vehicle (which is a requirement under the AMLO and SFO);
- opening a bank account in Hong Kong (this must be done before the SFC grants licensing approval);
- sourcing suitable responsible officers – a platform dual-licensed under the AMLO and SFO requires 2 responsible officers to supervise its regulated activities;
- preparing a compliance manual, client agreements, a business plan and other policies and documents;
- securing premises for the Hong Kong corporation;
- advising on the competence requirements for responsible officers and licensed representatives and reviewing CVs to advise whether relevant persons meet the criteria;
- compiling all relevant materials for the licensing applications (including forms and supplements for the proposed responsible officers, substantial shareholders and ultimate owner(s));
- submitting the licensing application to the SFC (including the application for approval of the proposed ROs); and
- advising on the platform operator’s ongoing reporting and notification obligations.

2. Advising on ICOs and securities token offerings

Advising/providing a legal opinion on whether a VA constitutes a security within the SFO’s definition thereof (i.e. security tokens);
Advising on the restrictions on a security token’s public offering in Hong Kong under the Companies (Winding Up and Miscellaneous Provisions Ordinance) (CWUMPO) and the SFO;
Drafting relevant documentation and selling restrictions to facilitate reliance on relevant CWUMPO and SFO exemptions from the CWUMPO requirement to issue and register a prospectus and the requirement for SFC approval of invitations to the Hong Kong public to acquire security tokens; and
Advising on the intermediaries entitled to market security tokens on issuers’ behalf.

3. Advising intending Hong Kong-based fund managers of the regulatory requirements for managers of crypto funds

Advising on the SFO licensing requirements for Hong Kong based fund managers;
Advising on the general fund manager licensing requirements and the additional licensing conditions for managers of funds or investment portfolios: (i) having an investment objective of investing in virtual assets (VA); or (ii) investing 10% or more of a fund or portfolio’s GAV in VA;
Advising on fund structuring and the advantages/disadvantages of using:
- a Hong Kong-incorporated fund, the various options – i.e. an Open-ended Fund Company incorporated under the SFO, a company incorporated under the Companies Ordinance; or a unit trust; and the benefits (including tax exemptions) and downsides of each;
- an offshore incorporated fund (e.g. a Cayman Islands or BVI segregated portfolio company);
Advising on the Hong Kong requirements for retail funds vs privately placed funds;
Incorporation of the fund vehicle and other relevant parties and preparation of all documentation;
Obtaining SFC authorisation for retail funds (including ensuring compliance with the SFC’s requirements for retail funds); and
Advising on fund managers’ ongoing reporting and notification obligations.

4. Advising entities on the regulatory requirements for distributing VA products/VA related products in Hong Kong

Advising on the licensing and other regulatory requirements for entities wanting to distribute VA products and VA-related products (including crypto funds) that are securities in Hong Kong – typically, these require a Type 1 (dealing in securities) licence;
Advising on the requirements for SFO-licensed entities under the SFC/HKMA Joint Circular on Intermediaries’ Virtual Asset-related Activities including due diligence on VA products and additional investor KYC and required warnings; and
The restrictions on offering VA derivative products to the Hong Kong public.

Please find attached our February 2022 newsletter on the requirements for distributors of VA/VA-related products, and providers of VA dealing and advisory services.

5. Advising entities on regulatory requirements for providing VA dealing and/or advisory services to Hong Kong persons

Advising on the restrictions under which SFC-licensed intermediaries can only offer clients the service of dealing in VA by: (i) introducing their clients to an SFC-licensed VA trading platform for direct trading; or (ii) through the intermediary’s omnibus account with an SFC-licensed VA trading platform.

6. Advising on the applicable anti-money laundering and counter-terrorist financing obligations including Travel Rule compliance

Advising on the obligations on licensed entities and the policies and procedures they must implement and maintain; and
Advising on the requirements for complying with the Travel Rule on transfers of VA.

7. Listing Crypto ETFs on the Hong Kong Stock Exchange (HKEX)

Advising on the HKEX listing of bitcoin or ether futures ETFs where the underlying futures are traded on the Chicago Mercantile Exchange; and
Drafting of documentation and application to the HKEX for listing.

CRYPTO-RELATED PROFESSIONAL EXPERIENCE

Advised Bitmain Inc., (then the world’s largest bitcoin mining machines manufacturer and mining pool operator) on highly technical regulatory aspects relating to its application to list on the Hong Kong Stock Exchange, and subsequently on its listing application in connection with its U.S. share offering;
Advised the only SFC licensed digital asset platform on the legal and regulatory aspects of its proposed security token offering activities and preparation of template documentation (including declarations, undertakings, mandates and placing agreements to be entered into between issuers, financial advisers and the platform);
Advised a telecommunications network infrastructure developer on its proposed activities and offering of its utility token (which could be staked for the operation of telecommunication and internet nodes through the blockchain network) on the applicable Hong Kong legal and regulatory issues;
Advised a robotic rental and data marketplace operator on the legal and regulatory aspects of its blockchain network and digital tokens in connection with proposed listing on a crypto exchange;
Advised a financial institution on the proposed creation of an online marketplace for art investors through the tokenisation of a physical art collection and the related Hong Kong legal, regulatory and practical considerations;
Advised the developer of an identity-verification, information exchange and payment application platform aimed at solving problems in the data brokers industry on the Hong Kong legal and regulatory aspects of its tokens and related activities;
Advised a licensed money lender in Hong Kong in connection with its proposed credit card issue on the potentially applicable regulations (including under Hong Kong’s securities laws, stored value facility (SVF)/retail payment system (RPS) regime, AML/CTF regulations etc.), for its potential use of cryptocurrency as collateral/security, repayment options and/or user rewards;
Advised a private company engaged in the operation of an online AML service screening cryptocurrency and wallet addresses in its seed financing, where the shares of the company were issued to the seed investors for Tether, an asset-based stablecoin;
Advised on the establishment of a joint venture for setting up a virtual assets exchange in Hong Kong;
Advised a financial group focused on foreign exchange and commodities trading on the Hong Kong legal and regulatory issues relevant to the acceptance of payment and deposits, and taking custody of, virtual currencies for the benefit of affiliated companies;
Advised a Hong Kong-listed online and mobile games developer, publisher and distributor in relation to its proposed provision of services as a virtual asset service provider for facilitation of transfers and exchanges between virtual assets and gaming assets and related activities;
Advised a digital trading platform on its proposed activities involving spot market trading, margin trading and short selling of EOSIO-based cryptocurrencies;
Advised the provider of a blockchain-based supply chain management solution enabling users to obtain liquidity by collateralising assets on the regulatory status of its two blockchain tokens under Hong Kong law and the applicability of Hong Kong banking laws to its proposed activities;
Advised the developer of a platform on which film makers can provide content to viewers which is unavailable via traditional film distribution channels on whether its blockchain token constituted a “security” or other regulated financial instrument under Hong Kong law;
Advised the developer of a platform designed for high-volume transaction processing (e.g. payments and capital markets clearing) creating a private ledger between trade counterparties on the Hong Kong regulatory status of blockchain tokens to be used to provide access to the platform and as a means of payment;
Provided an analysis of the application of Hong Kong securities law to the digital token to be used on a decentralised health platform aligning healthcare stakeholders around the shared goal of patient empowerment and improved clinical outcomes, at lower cost;
Advised the provider of a platform aimed at resolving issues associated with crypto exchanges (e.g. low liquidity and high trading costs) in connection with the Hong Kong legal and regulatory aspects of its tokens and related activities;
Advised a consumer blockchain platform which would allow users to monetise and utilise their data as an asset under Hong Kong laws and regulations applicable to its blockchain tokens and activities;
Advised a licensed crypto lender on the Hong Kong regulatory requirements for offering and trading tokens (through interest-bearing simplified stable bonds contracts convertible into other virtual assets in set circumstances;
Advised on the Hong Kong regulatory status (as securities or other financial instruments) of tokens associated with a platform focused on the development and distribution of research and market data on cryptoassets and other applicable Hong Kong laws;
Provided a Hong Kong legal and regulatory analysis of the status of a digital token for a drug and alcohol addiction rehabilitation programme;
Advised on the Hong Kong regulatory status of two digital tokens to be issued in relation to the funding of hotel projects;
Advised on the Hong Kong securities law implications of offering a platform’s digital tokens in Hong Kong;
Advised on and drafted a token distribution agreement;
Advised the developers of a platform for the sharing economy on the Hong Kong regulatory status of its token;
Advised on the Hong Kong regulatory status of digital tokens issued in relation to a platform providing decentralised finance and on the application of Hong Kong laws to its activities;
Advised a digital marketing company on the legal position of holding clients’ virtual assets and regulatory compliance with the licensing requirements for money service operators;
Advised a prospective client on the proposed establishment of a virtual bank in Hong Kong consisting of an entity carrying on cryptocurrency trading activities;
Advised numerous parties on a preliminary basis on the requirements for establishing a crypto trading exchange in Hong Kong;
Advised several fund managers on the Hong Kong licensing requirements for managing and/or distributing crypto funds; and
Advised a Hong Kong fund manager on the licensing requirements applicable to managing a fund investing in crypto futures.

We have experience in blockchain technologies, fintech, crypto and virtual assets regulation (including virtual exchanges, security token offerings (STO), initial coin offerings (ICO), non-fungible tokens (NFT) and decentralised finance (DeFi)), funds, corporate finance and mergers and acquisitions (M&A).

Our Web3 and digital assets team has sophisticated knowledge of underlying crypto technologies to create dynamic and practical solutions whilst navigating constantly developing legal, regulatory and compliance regimes. Our network with other notable law firms that have experience in crypto related matters in various jurisdictions enables us to collaborate and deliver comprehensive legal services that are commercially sensible and specific to the legal issues that may arise in any jurisdiction.

We are able to assist with a wide range of legal services relating to Web3 and crypto related matters that can arise in this area including:

entity formation for crypto and virtual assets related projects
strategic planning and general legal advice
structuring of legally compliant crypto and virtual assets related projects
drafting and negotiating contracts and agreements
due diligence for all types of transactions including digital asset transactions
advising on crypto and virtual assets related transactions including but not limited to those relating to technology, smart contracts, custody, tokenisation, mining and digital asset protection
advising on decentralised autonomous organisation (DAO) structures, STOs, ICOs, NFTs and DeFi related matters
cryptocurrency disputes, including litigation, arbitration and mediation
advising on all aspects of legal, regulatory and compliance issues including but not limited to intellectual property, data privacy, licensing, capital raising and taxation

We are at the forefront to assist clients globally in traversing the intricate legal and regulatory landscape associated with the fast-paced evolution of Web3 and blockchain technology. We are able to offer pioneering legal solutions to address novel challenges, often presented as unprecedented matters, ensuring our clients are well-positioned in this rapidly advancing field.