China is playing a pivotal role in making Hong Kong a hub for cryptocurrency innovation, yet the city’s strict regulatory environment is creating friction for those seeking entry into the market. Over the past few years, Hong Kong has positioned itself as a crypto-friendly jurisdiction, offering clear regulations and a strong government push for blockchain development. With no capital gains tax on cryptocurrencies and a defined licensing regime, the city aims to attract innovators and investors while maintaining stability.

However, entering Hong Kong’s crypto sector isn’t simple. Businesses must comply with comprehensive anti-money laundering and know-your-customer protocols, undergo rigorous risk management, and maintain meticulous records of client assets and transactions. All virtual asset trading platforms must obtain a license from the Securities and Futures Commission (SFC). High standards for licensing and ongoing compliance, including asset custody and segregation requirements, add significant cost and complexity.

Retail investors are also subject to strict suitability criteria, with access limited mainly to those classified as Professional Investors—individuals with portfolios exceeding HKD 8 million. This makes participation challenging for the general public and smaller investors.

Hong Kong recently tightened its regulations further with the introduction of the Stablecoins Ordinance, effective August 1, 2025. This law mandates that anyone issuing fiat-referenced stablecoins, whether inside or outside Hong Kong, must secure a license from the Hong Kong Monetary Authority (HKMA). The regulation covers all activities related to stablecoins, including marketing, and sets out detailed guidance on compliance and supervision.

While these regulatory measures are designed to foster innovation and financial stability, many market participants find the entry barriers high. Licensing processes are intricate, and ongoing supervision by authorities like the HKMA and SFC means companies must invest in legal and operational infrastructures from inception.

Hong Kong’s approach reflects China’s broader strategy: encourage technological advancement in the crypto space, but do so under close state oversight. For entrepreneurs and investors, the city offers unique opportunities—provided they are prepared for the hurdles posed by its robust regulatory landscape. The promise of innovation is strong, but only those able to meet the requirements can truly participate in the next era of Hong Kong’s digital economy.