Written by: Mankiw Blockchain

Since the Hong Kong Securities and Futures Commission held a briefing for applicants of virtual asset trading platforms on June 12, the actions of all virtual currency exchanges that have successfully applied, been deemed to have been licensed, or even withdrawn their applications for liquidation have attracted much attention. In this regard, many crypto media and analysts have shared their views and analysis on the incident. Lawyer Liu Honglin, director of Mankiw Law Firm, also accepted an exclusive interview with Web3.0 media DeThings. For details, please see "Mankiw News | DeThings Interview with Lawyer Liu Honglin, Hong Kong Virtual Currency Exchanges "Cleared but Not Withdrawn"? ".

On June 17, according to a news flash released by Wu Shuo, a well-known domestic Web3 media, Tiger Brokers announced that it had been approved to upgrade its license and officially provide crypto trading for retail investors in Hong Kong. In response, Mankiw Law Firm collected the views of several senior Web3.0 lawyers on "the progress of the Hong Kong Securities Regulatory Commission's license issuance" and "whether Tiger Brokers' license means the gradual opening of virtual currency trading in my country", and hereby share them.

Liu Honglin

Founder of Mankiw LLP

According to the relevant regulations of the Hong Kong Securities and Futures Commission, after June 1, 2024, all virtual asset trading platforms operating in Hong Kong must be licensed by the Securities and Futures Commission or be "deemed to be licensed" virtual asset trading platform applicants, otherwise operating in Hong Kong will be a criminal offense. At the same time, applicants who are "deemed to be licensed" will not have much promotion in terms of marketing to individual customers, because they are still the focus of supervision by the Hong Kong Securities and Futures Commission, which may affect their formal approval.

At present, Tiger Brokers has upgraded from "deemed to be licensed" to licensed, so it has officially announced that it will provide crypto trading to retail investors in Hong Kong. However, it is worth noting that according to China's existing regulatory policies, virtual currency exchanges cannot operate in China or for Chinese citizens. According to the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) issued by ten ministries and commissions on September 15, 2021, it is clear that overseas virtual currency exchanges providing services to residents in my country through the Internet are also illegal financial activities. For domestic staff of relevant overseas virtual currency exchanges, as well as legal persons, non-legal organizations and natural persons who know or should know that they are engaged in virtual currency-related businesses and still provide them with marketing, payment settlement, technical support and other services, relevant responsibilities shall be investigated in accordance with the law. Therefore, even if Tiger Brokers obtains a formal license issued by the Hong Kong Securities and Futures Commission, it still cannot provide virtual asset trading services to users in mainland my country.

At the same time, for other trading platforms that have withdrawn their licenses or failed in their applications, even if they hold compliance licenses issued by specific countries and regions, they are only subject to the laws of the country where they are located. Holding a license in another country does not mean that they can conduct business globally. Therefore, virtual currency exchanges only hold qualified licenses from other countries and still cannot conduct virtual currency exchange business in mainland China or Hong Kong, China.

Kim Kam-ji

Mankiw LLP's Foreign Affairs Team

Compared with established Hong Kong local brokerages such as Victory Securities, the mainland is obviously more familiar with Internet brokerages such as Tiger Securities. After all, many mainlanders buy US and Hong Kong stocks through Tiger Securities. But in fact, the legality of Tiger Securities providing US and Hong Kong stock investments to mainland China has always attracted much attention. According to the relevant regulations of the China Securities Regulatory Commission, any institution that provides securities trading services to residents in China must obtain the corresponding license. However, Tiger Securities and other similar Internet brokerages obviously do not have mainland financial licenses, and the compliance of this practice has always been a gray area. Although this model is currently operating, the potential compliance risks cannot be ignored.

Now that Tiger Brokers has obtained a license issued by the Hong Kong Securities and Futures Commission, it can officially provide crypto investment services to Hong Kong users. It is still unknown whether it will continue its previous alternative business approach of opening up U.S. and Hong Kong stocks to mainland residents, and then provide mainlanders with a channel to buy and sell virtual currencies (currently only BTC and ETH for retail investors). We can only stay tuned.

Gu Jining

Mankiw LLP's Foreign Affairs Team

Tiger Brokers recently announced that it has been approved to upgrade its license, allowing it to open virtual asset trading to retail investors in Hong Kong. The trading process is usually that the broker opens an omnibus account (customer pooled account) on a licensed exchange (currently only OSL and HashKey), and then trades virtual assets on the licensed exchange for each customer according to their instructions.

In fact, as early as November last year, Victory Securities and Interactive Brokers were approved to provide virtual asset trading and consulting services to retail investors. As securities firms, they originally held the Hong Kong Securities and Futures Commission's No. 1 license (securities trading) and No. 4 license (providing advice on securities), and this time they did the so-called "license upgrade" operation.

Compared with virtual asset exchanges, brokerage firms are usually less popular, but they are actually closer to retail investors, especially traditional investors. Ordinary retail investors can use a brokerage APP to achieve one-stop trading services for stocks, bonds, futures, options, funds, virtual assets and other targets.

It is worth noting that according to regulatory requirements, licensed exchanges can only provide "qualified large virtual assets" (currently only BTC and ETH) trading services to Hong Kong retail investors, which is much less than the types of virtual assets that qualified investors can trade. Therefore, the trading targets that the above-mentioned brokerages can currently provide to retail investors are also limited to BTC and ETH. It is expected that Hong Kong will open up more virtual assets for investors to trade in the future.