HashKey, a prominent digital asset company based in Hong Kong, has launched its over-the-counter (OTC) brokerage service, HashKey Brokerage. This strategic move follows the exchange's recent acquisition of a license from Hong Kong regulators, permitting it to offer retail-level cryptocurrency trading services. Previously, HashKey's virtual asset trading operations were restricted to professional investors. Now, retail traders can also access select high-value tokens, including Bitcoin and Ethereum.
Although the Securities and Futures Commission (SFC) had not officially confirmed the approval at the time of the announcement, HashKey has become the first entity authorized to serve retail clients under Hong Kong's new Virtual Asset Service Provider (VASP) licensing regime. The exchange announced the milestone on social media, stating: "HashKey Exchange is a licensed virtual asset exchange in Hong Kong and has upgraded its Type 1 and Type 7 licenses to provide retail services. All users can now enjoy a secure and straightforward trading experience!"
Expansion Under Hong Kong’s Regulatory Framework
HashKey Group, the parent company of the exchange, had been participating in a voluntary licensing program alongside another digital asset trading platform, OSL. The upgrade of its Type 1 (dealing in securities) and Type 7 (automated trading services) licenses marks a significant step in its planned expansion. Earlier this year, the group disclosed its intention to operate as a regulated exchange in Hong Kong, targeting a launch within the second quarter. Reports also indicated that the Asian financial services group was in early-stage talks to raise up to $100 million to fund its expansion efforts.
OSL, the digital asset subsidiary of BC Group, had previously received in-principle approval for its applications for Type 1 and Type 7 licenses. According to Keith Choy, the interim head of intermediaries at the SFC, platforms aiming to offer virtual asset trading that falls under securities or futures must obtain a Type 7 license under the Securities and Futures Ordinance.
Understanding Hong Kong’s New Digital Asset Regulations
Hong Kong's new mandatory cryptocurrency regulatory framework came into effect on June 1, representing a concerted effort to attract global investors and solidify its status as an international financial hub. These rules require all virtual asset trading platforms serving retail investors to be licensed. Additionally, the city has encouraged local banking institutions to engage in strategic and business partnerships with crypto firms seeking to establish a regional presence.
Although the new regime has attracted interest from several industry-leading companies—including HTX, OKX, and Amber Group—the full extent of its impact on the local market is still unfolding. The city’s ambitions received a further boost from Plutus VC, an innovative enterprise that pursued the establishment of a ProDigital fund. The venture firm announced it had received commitments of $30 million during a six-month fundraising period and aimed to raise $100 million by the end of 2023. The fund is designed to align with Hong Kong’s policies and expand its influence to other regions, including Australia, Singapore, Europe, and the United States.
ProDigital Future will focus on investing in early-growth-stage Web3 startups, particularly those with connections to China and those transitioning into the Web3 space.
Contrasting Approaches: Mainland China and Hong Kong
While Hong Kong is embracing regulated cryptocurrency trading, mainland China maintains its strict prohibition on most crypto-related activities. However, Beijing has shown growing interest in the underlying technology. In May, the Beijing Municipal Science and Technology Commission, along with the administrative committee of Zhongguancun Science Park, released a white paper exploring Web3 development and innovation.
The paper defines Web3 as an inevitable evolution of the internet, centered on creating highly interactive experiences that merge physical and virtual reality through immersive, three-dimensional environments. It discusses strategies for fostering innovation in decentralized blockchain technology, the metaverse, and non-fungible tokens (NFTs). Prominent industry figures, such as Binance CEO Changpeng Zhao, noted the interesting timing of the development, while Tron's Justin Sun praised China's forward-thinking approach to recognizing the transformative potential of these technologies.
The Current State of Web3 Development
The white paper categorizes Web3 into four distinct layers:
- Infrastructure Layer: Includes foundational technologies like artificial intelligence (AI) and blockchain.
- Interaction Terminal Layer: Comprises devices and technologies that enable interaction with both real and virtual worlds.
- Platform Tools Layer: Provides the technical support required to create digital environments.
- Application Layer: Delivers practical application services to end-users.
In its analysis of the industrial landscape, Beijing identified generative AI, XR interactive terminals, and content production tooling platforms as critical areas for Web3 research and innovation. The paper also acknowledged that major tech giants—both international (like Apple, Meta, Microsoft, Google, and NVIDIA) and domestic (like Baidu, ByteDance, and Tencent)—are at the forefront of shaping and driving the industry's development.
The Global Race for Web3 Leadership
Beijing's analysis suggests that while the United States currently leads in Web3 development, Europe is strongly focused on privacy protection, and Japan and South Korea are striving for industry leadership. Domestically, over 30 Chinese provinces and municipalities have introduced supportive policies, with cities like Beijing, Shanghai, Guangzhou, and Hangzhou showing particular enthusiasm.
The combination of favorable legislation in Hong Kong, backed by capital from wealthy mainland investors, could potentially propel the region to a top position for cryptocurrency firms. This, in turn, could have a positive impact on the broader crypto market. Interestingly, a recent Wall Street Journal report claimed that China remains Binance's largest market despite the domestic ban on cryptocurrency activities, highlighting the persistent and significant interest from Chinese investors.
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Frequently Asked Questions
What does HashKey's new license allow it to do?
HashKey's upgraded Type 1 and Type 7 licenses permit its exchange to offer cryptocurrency trading services to retail investors in Hong Kong, not just professional investors. This includes allowing retail clients to trade major tokens like Bitcoin and Ethereum.
How does Hong Kong's new VASP licensing work?
The Virtual Asset Service Provider licensing regime requires all cryptocurrency trading platforms operating in Hong Kong and serving retail clients to be licensed by the Securities and Futures Commission (SFC). This is part of a broader framework to regulate the industry and protect investors.
Can retail investors in mainland China use HashKey?
No, mainland China maintains a ban on virtually all cryptocurrency trading and transactions. HashKey's retail services are specifically for investors within Hong Kong, which operates under a different legal and regulatory system.
What is the difference between Type 1 and Type 7 licenses?
A Type 1 license from the SFC allows a firm to deal in securities, while a Type 7 license permits providing automated trading services. For a crypto exchange offering trading in tokens deemed to be securities, both licenses are typically required.
What is Web3, according to China's recent white paper?
The white paper defines Web3 as the next evolution of the internet, characterized by immersive 3D experiences that blend the real and virtual worlds. It focuses on innovation in blockchain, the metaverse, and NFTs, viewing it as a significant technological shift.
Why is Hong Kong encouraging crypto businesses while mainland China bans them?
Hong Kong operates as a Special Administrative Region with a degree of legal autonomy. Its strategy aims to cement its role as a global financial hub by embracing financial innovation, including digital assets, while implementing robust regulations to manage risk.