Hong Kong Virtual Asset Managers: Key Obligations

As the virtual asset management industry continues to grow in Hong Kong, it’s essential for managers to understand their key obligations. Failure to comply with these requirements can result in severe consequences.

Distribution of Virtual Asset Fund

Licensing and Due Diligence Requirements

• Ensure that either you hold a Type 1 license or appoint a holder of a Type 1 license as your Distributor.
• Enforce selling restrictions, measure investor exposure to the fund according to net worth, and conduct due diligence on the virtual fund and asset manager.

Investor Disclosure Requirements

• Provide sufficient information about investing in the virtual asset fund, including prominent warnings.

Management of Virtual Asset Fund

Key Requirements and Obligations

• Ensure that you can comply with key requirements and obligations, including:
  • Notifying the relevant authorities (SFC) and agreeing to the terms and conditions.
  • Maintaining liquid capital of at least HK$3 million or variable required liquid capital.
  • Disclosing leverage conditions employed on behalf of the fund.
  • Establishing effective liquidity management policies and procedures.
  • Acting in the best interests of investors when terminating the fund and making adequate disclosures.
  • Ensuring an effective custodial arrangement for the assets of the fund.

Specialized Advisory Services

Mazars can provide specialized advisory services to help virtual asset managers comply with their obligations, including:

• Reviewing controls, suitability, and due diligence requirements.
• Reviewing policies, procedures, processes, controls, and fund documentation.