Hong Kong deserves to be one of the most lucrative places on the planet. Hong Kong attracts people in business and investors from all over the world to invest in the financial sector due to its importance on the international level. Advances in digital technology have called for many changes in Hong Kong’s financial industry. One such change was the entrance of cryptocurrency into the Hong Kong market. Actually, the usage of cryptocurrencies in Hong Kong is in active development. The country’s government has also realized the significance of cryptocurrencies for their state’s economy.
Opening a crypto company in such a country as Hong Kong can provide numerous advantages, including an advantageous geographical location, a flexible market, a business-friendly environment, a well-developed financial system, a rather sound legal basis, and many others. It is quite advisable to register a crypto company in Hong Kong; however, there is a need to ensure strategic planning and compliance. Cryptocurrency businesses must adhere to the Hong Kong authorities’ legal requirements and laws.
This article will acquaint us with the specific aspects of the current legal framework for crypto companies, the process of registration of a crypto company in Hong Kong, and the major concerns crypto businesses in the region should exercise due attention to.
Understanding the Regulatory Environment for Crypto
Hong Kong has one of the most friendly regulatory standards for crypto. Hence, it is very easy for investors and entrepreneurs to set up a crypto firm in Hong Kong. In fact, as part of the legal framework of Hong Kong, several laws are enacted aimed at monitoring and managing cryptocurrencies as accurately as possible in Hong Kong. Moreover, the regulation of cryptocurrencies in Hong Kong deals with establishing a fair platform by which innovation, stability, transparency, and investor protection can be enhanced. The crypto rules in Hong Kong are structured in a manner that depicts a clear standpoint of regulatory obligations; all summed up to be secure and safe for both the crypto firms and their investors.
Hong Kong has two major authorities that govern the country’s overall cryptocurrency situation. The SFC oversees the platforms for trading securities tokens and provides working directions for the smooth running of the cryptocurrency market. The HKMA has provided some guidance on virtual currencies used as means of payment that might fall under the subsidy of the Payment Systems and Stored Value Facilities Ordinance.
Although Hong Kong is a perfect place for cryptocurrency activities, several crypto activities are prohibited. The cryptocurrencies by which the parties are permitted in Hong Kong are trading digital currency on an authorized platform, Virtual Asset Service Providers (VASPs) with a license, issuance of a stablecoin, Mining, Initial Coin Offerings (ICOs) with a permit and provided they meet the compliance tests, regulatory sandbox participation and many more activities. The crypto activities which are prohibited in Hong Kong are as follows: failure to adhere to the AML regulations; failure to report relevant cryptocurrency financial transactions; ICOs conducted with non-compliance; virtual asset trading platform operating without a license; the promotion of security tokens without the necessary permits; and a few other activities.
There was a new licensing regime put in place in June 2023 in Hong Kong under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). It is known as the Virtual Asset Service Providers (VASPs) licensing regime. The capabilities arising from licensing of VASPs are better regulation, increased transparency, better security and international compatibility. To operate in Hong Kong VASPs are obliged to get a license with reference to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). They must also do customer due diligence (CDD) and maintain a full register of the cryptocurrencies.
Steps to Register a Crypto Company in Hong Kong
The first question that comes to mind when thinking about a crypto company is how to register a crypto company in Hong Kong. This section will give a detailed answer to this question and will clear all your doubts regarding the steps to register a crypto company in Hong Kong.
1. Company Incorporation
The first step in registration of a crypto company is the registration of the company in Hong Kong. In order to start your company’s incorporation in Hong Kong you have to decide on the name for your business and on the business structure selecting the proper type of the company, to fill in the application form and to receive the Certificate of Incorporation.
After that, you must complete the application and attach it to the Companies Registry. Upon its approval you get the Certificate of Incorporation and commence with the company’s operation. After obtaining Incorporation Certificate you have further need to apply for Business Registration Certificate from the Inland Revenue Department within one month of incorporation.
2. Required Documentation and Licenses
You are required to submit various documents and obtain several licenses to operate smoothly in Hong Kong. Hong Kong crypto license application process is quite simple and easy to understand. To register your crypto company in Hong Kong, you will need to gather the Articles of Association, Incorporation Form (Form NNC1), company name registration, business structure registration, identification documents of directors and shareholders, Virtual Asset Service Provider (VASP) License and a few other documents and license depending upon your business operations.
3. AML/CTF Compliance Obligations
All the Hong Kong based crypto companies must adhere to the rules stipulated in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance or AMLO as popularly known. This particular ordinance has been brought to being in order to protect the customers and also monitor the virtual assets to ensure they are not involved in any unlawful acts. In this way, all the crypto companies in Hong Kong are obliged to follow the requirements of the AML/CTF Ordinance.
4. Tax Implications and Considerations
According to the taxation in Hong Kong, the profits gained from the trading of cryptocurrencies are subject to profits tax. Depending upon the holding period, nature of your crypto assets and trading activities of cryptocurrencies, your company might be subject to capital gains tax. Capital gained from long-term investment may not be subject to tax, but frequent crypto trading might be subject to profits tax.
Key Considerations for Crypto Businesses
Here is a piece of detailed information about the key considerations for crypto businesses in Hong Kong:
Choosing the Right Business Structure
You must choose your business structure wisely because a business structure plays a vital role in the success of a business. Different business structures have different advantages and disadvantages. Therefore, you must understand your business needs and choose a business structure that best resonates with your requirements.
Building a Strong Compliance Framework
To avoid getting into any legal battles, you must build a strong compliance framework in your company. Building a strong compliance framework allows you to follow all the rules and regulations properly and keeps you safe from legal charges and penalties in Hong Kong. Moreover, a strong compliance framework can help you create a positive business image in the market.
Risk Management Strategies
To mitigate the potential risks properly, you can work on your risk management strategies. You can get help from industry experts and crypto professionals to build your risk management strategies. It is important to work on risk management strategies as it helps you handle difficult situations easily.
Talent Acquisition and Retention
It is crucial to recruit talented individuals who can add some value to the company. Hong Kong is a highly competitive landscape and hiring talented individuals can be a challenging task. So, to retain them for a longer time in your company, you must provide them with the best working environment and appreciate their work. You can also offer competitive benefits to attract more individuals and retain the existing ones.
Building Trust and Reputation in the Market
Another crucial factor that a firm needs to determine before establishing the crypto company in Hong Kong is trust and reputation. The belief and image that companies establish could be defined by the reaction of the employees of that company, the consumers’ response, compliance to legal provisions and several others. There is an opportunity to address each of them separately if you aim at developing a favorable company image among the market participants.
Need Expert Assistance in Forming a Crypto Company in Hong Kong?
As much as it may seem so, it is extremely easy to register a crypto company in Hong Kong if you can follow the full process. The above article contains all the details of the legal framework governing cryptocurrencies in Hong Kong, how to start a crypto firm and other things to note for crypto firms in Hong Kong.
If you have an intention to register a crypto company in Hong Kong then Startupr can assist you – Contact us for more information!