Hong Kong SFC Licensing for Security Token Offerings

Introduction

Hong Kong has emerged as a leading global hub for digital asset regulation, offering one of the most comprehensive and forward‑looking frameworks for security token offerings (STOs) and real‑world asset (RWA) tokenisation. The Securities and Futures Commission (SFC) has consistently applied a clear, principles‑based approach: “same business, same risks, same rules.”Tokenised securities are fundamentally traditional securities with a tokenisation wrapper, and the existing legal and regulatory requirements governing traditional securities markets apply equally to tokenised products.

For issuers, intermediaries, and platforms seeking to tokenise real estate or other real‑world assets in Hong Kong, this regulatory clarity provides a structured pathway. However, it also imposes stringent licensing, disclosure, and ongoing compliance obligations that must be carefully navigated. The SFC has issued several landmark circulars—most notably the November 2023 circulars on tokenised securities‑related activities and tokenisation of investment products, followed by the November 2025 expansion circular that relaxed certain requirements and broadened permissible activities. Meanwhile, the Stablecoins Ordinance (Cap. 656) , which came into effect on 1 August 2025, establishes a formal licensing regime for fiat‑referenced stablecoin issuers under the Hong Kong Monetary Authority (HKMA).

Navigating this multi‑layered regulatory landscape requires deep expertise in both Hong Kong’s securities laws and blockchain technology. SQMU consulting services bridge this gap, offering end‑to‑end guidance for real estate tokenisation projects—from legal structuring and licensing to smart contract deployment and ongoing compliance. This article provides an overview of the SFC’s licensing framework for security token offerings and demonstrates how SQMU helps clients achieve compliant, investor‑ready tokenisation solutions. For a detailed regulatory analysis, refer to our Hong Kong real estate tokenisation guide.

The SFC’s Core Principle: “Same Business, Same Risks, Same Rules”

Since its 2019 Statement on Security Token Offerings, the SFC has maintained a consistent regulatory philosophy: tokenised securities are not a new asset class; they are traditional securities represented in digital form. This “see‑through” approach means that:

A token representing a share in an SPV that holds real estate is treated as a security under the Securities and Futures Ordinance (Cap. 571) (SFO).
Any person carrying on a business in dealing in such tokens, advising on them, or managing a fund investing in them must hold the appropriate SFC licence.
Public offers of tokenised securities require a prospectus authorised by the SFC, unless an exemption applies.

The SFC has further clarified that tokenised financial products are fundamentally traditional financial products with a tokenisation wrapper, and the same regulatory requirements apply. This principle provides legal certainty but also means that tokenisation does not offer a regulatory shortcut.

Regulatory Roadmap: The ASPIRe Framework

In February 2025, the SFC published ASPIRe, its five‑pillar regulatory roadmap for Hong Kong’s virtual asset market, outlining the regulator’s vision for a sustainable and innovative digital asset ecosystem. The roadmap guides the SFC’s rulemaking and supervisory priorities, including the expansion of licensed virtual asset trading platform (VATP) activities, the introduction of new licensing regimes for virtual asset advisers and asset managers, and the development of tokenisation infrastructure. The ASPIRe framework reinforces Hong Kong’s commitment to building a regulated, transparent, and resilient digital asset market—providing a clear directional signal for tokenisation projects.

The November 2023 Circulars: Foundational Guidance

On 2 November 2023, the SFC issued two landmark circulars that remain the cornerstone of tokenisation regulation in Hong Kong.

1. Circular on intermediaries engaging in tokenised securities‑related activities

This circular provides conduct‑related guidance for intermediaries (e.g., brokers, asset managers, advisers) engaged in tokenised securities activities. Key requirements include:

Product provider responsibility: Intermediaries remain ultimately responsible for the management and operational soundness of the tokenisation arrangement, regardless of any outsourcing.
Due diligence: Intermediaries must conduct due diligence on issuers, the products to be tokenised, the technology aspects of tokenisation, and third‑party service providers.
Risk management: Appropriate measures must be in place to manage cybersecurity risks, data privacy, system outages, and business continuity.
Custody: Appropriate custodial arrangements must be in place that address the features and risks of the tokenised products.
Disclosure: Adequate disclosure must be made regarding the tokenisation arrangement, including whether off‑chain and/or on‑chain settlement is final, limitations imposed on token transfers, whether a smart contract audit has been conducted, and the legal and beneficial title of the tokens.

2. Circular on tokenisation of SFC‑authorised investment products

This circular sets out the requirements for the tokenisation of SFC‑authorised investment products (e.g., funds, structured products) that are offered to the public in Hong Kong. Key points include:

Prior consultation: For new investment products that have tokenisation features and plan to seek the SFC’s authorisation, prior consultation with the SFC is required. Prior consultation is also required for tokenisation of existing SFC‑authorised investment products.
Record keeping: Proper records of token holders’ ownership interests must be maintained; tokenised products should not be issued in bearer form.
Blockchain selection: Product providers should not use public‑permissionless blockchain networks without additional and proper controls (e.g., by using a permissioned token or adding whitelist restrictions).

These circulars apply to any intermediary or issuer engaging in tokenised securities activities in Hong Kong, regardless of whether the underlying asset is real estate, bonds, or funds.

SFC Licensing for Security Token Offerings

Type 1 and Type 7 Licences for Trading Platforms

For platforms that wish to offer trading in tokenised securities (including tokenised real estate), the primary licensing pathway is the Virtual Asset Trading Platform (VATP) regime. Under this regime, a platform operating a centralised trading venue for virtual assets that are securities must hold:

Type 1 licence (dealing in securities) under the SFO.
Type 7 licence (providing automated trading services) under the SFO.

These licences require the platform to meet stringent fit‑and‑proper criteria, maintain adequate financial resources, implement robust AML/CFT controls, and comply with the SFC’s Code of Conduct.

Types 4 and 9 Licences for Advisory and Asset Management

Entities providing advice on tokenised securities or managing portfolios that include tokenised real estate may require:

Type 4 licence (advising on securities) – for providing investment advice on tokenised securities.
Type 9 licence (asset management) – for managing funds that invest in tokenised securities.

Where a portfolio has 10% or more of its total asset value invested in virtual assets, a Type 9 licence is required.

The VATP Dual Licensing Regime

Since 1 June 2023, the SFC has operated a dual licensing regime for virtual asset trading platforms under the Anti‑Money Laundering and Counter‑Terrorist Financing Ordinance (AMLO, Cap. 615) , in addition to the SFO licensing requirements. Platforms that provide virtual asset trading services to clients using an automated trading engine and also provide custody services as an ancillary service must be licensed under both regimes.

Key requirements for VATPs include:

Custody of client assets: Must be held by a wholly‑owned subsidiary, with 98% in cold storage and 2% in hot storage, subject to strict asset segregation, insurance, and audit requirements.
Minimum capital: Proposed minimum paid‑up capital of HK$5 million, with liquid capital requirements up to HK$3 million depending on the business model.
Client onboarding: Full KYC/AML checks, including source of funds verification.

As of July 2025, 11 platforms had been formally licensed under the VATP regime.

New Licensing Regimes for Virtual Asset Advisers and Asset Managers (Under Consultation)

In December 2025, the Financial Services and the Treasury Bureau (FSTB) and the SFC launched a consultation on proposed new licensing regimes for virtual asset advisers and virtual asset asset managers. The key proposals include:

Virtual asset advisers: Any entity providing advice on virtual assets (including tokenised securities) will require a dedicated licence, with requirements mirroring the existing Type 4 licence.
Virtual asset asset managers: Any entity managing portfolios that include virtual assets (regardless of proportion) will require a dedicated licence, with requirements mirroring the existing Type 9 licence.
Custody requirements: Licensed virtual asset dealers will be required to use only Hong Kong‑licensed virtual asset custodians (not those regulated overseas) to safeguard client virtual assets.

These new regimes are expected to be finalised in 2026–2027, further clarifying the regulatory perimeter for tokenised real estate activities.

The November 2025 Expansion Circular: Key Changes

On 3 November 2025, the SFC issued a Circular on expansion of products and services of virtual asset trading platforms, which introduced several significant relaxations:

1. Removal of the 12‑Month Track Record Requirement

Previously, VATPs could only offer virtual assets that had a 12‑month track record. The SFC now no longer requires virtual assets (including stablecoins) to have a 12‑month track record before a VATP offers them to professional investors. This change, effective immediately, significantly expands the range of tokenised securities that can be listed on licensed VATPs, including newly tokenised real estate assets.

2. Stablecoins from Licensed Issuers

Stablecoins issued by an HKMA‑licensed stablecoin issuer are not subject to the 12‑month track record requirement and can be offered to retail investors, subject to suitability assessments. This creates a clear regulatory pathway for using regulated stablecoins in tokenised real estate transactions.

3. Distribution of Tokenised Securities

VATPs are now explicitly permitted to distribute tokenised securities in accordance with existing laws, codes, guidelines and regulations. This removes previous ambiguity and opens the door for secondary market trading of tokenised real estate on licensed platforms.

4. Shared Order Books with Overseas Platforms

The SFC now allows licensed VATPs to integrate order books with qualified overseas VATPs to form a Shared Order Book, enabling cross‑border liquidity without requiring separate licences in each jurisdiction. This is particularly valuable for tokenised real estate offerings targeting international investors.

5. Secondary Trading for Retail Investors (Under Consideration)

In February 2026, the SFC announced that it is considering allowing licensed VATPs to provide secondary trading services for tokenised securities to retail clients. The authorities are studying the relevant requirements, operational risks, and control measures, and are drafting a related circular. Currently, Hong Kong retail investors can only subscribe to and redeem tokenised funds in the primary market. This potential expansion would significantly enhance liquidity for tokenised real estate investments.

Stablecoins Ordinance (Cap. 656): A Formal Licensing Regime

The Stablecoins Ordinance (Cap. 656) came into effect on 1 August 2025, establishing a formal licensing regime for fiat‑referenced stablecoin (FRS) issuers in Hong Kong under the HKMA. The ordinance applies to any entity issuing a stablecoin pegged to any fiat currency (including HKD, USD, EUR, etc.) in Hong Kong.

Key Requirements for Stablecoin Issuers

Licensing: Any individual or entity seeking to issue a stablecoin in Hong Kong must obtain a licence from the HKMA.
Reserve backing: 100% backing by high‑quality liquid assets (cash, government bonds), held in segregated accounts.
Redemption rights: Guaranteed redemption at par value within a specified period.
AML/CFT compliance: Robust anti‑money laundering programmes and transaction monitoring.
Capital requirements: Minimum capital and liquid assets as prescribed by the HKMA.

Current Status

As of April 2026, the HKMA has not yet issued any stablecoin licences, having missed its March 2026 target for the first batch of approvals. However, 36 applications have been received, and HSBC and Standard Chartered are reportedly among the first recipients expected to receive licences. The delay is described as administrative, and the overall plan remains on track.

For tokenised real estate projects in Hong Kong, using an HKMA‑licensed stablecoin for payments, rent collection, or investor distributions will be the compliant path forward once licences are issued.

Legal Structuring for Real Estate Tokenisation in Hong Kong

Hong Kong’s land registration system currently operates under the Land Registration Ordinance (Cap. 128) , which is a deeds‑registration system that does not support direct digital or fractional title registration. A new Land Titles Ordinance (Cap. 585) has been enacted and is expected to be implemented on a “new land first” basis starting in 2027. However, for the foreseeable future, tokenised real estate must be structured using a legal vehicle that holds the property title.

The SPV or Limited Partnership Fund (LPF) Model

The SFC has approved Hong Kong’s first real estate tokenisation project—a limited partnership fund holding an interest in Derlin Building, a commercial property in Central—through a “no‑action letter” in February 2026. This precedent demonstrates that the SFC is open to real estate tokenisation, provided the structure complies with existing securities laws.

For real estate tokenisation, the appropriate legal structures are:

Special Purpose Vehicle (SPV): A private limited company holds the property title; the company’s shares are tokenised. Investors hold tokens representing shares in the SPV.
Limited Partnership Fund (LPF): A registered limited partnership holds the property interest; token holders are limited partners. The LPF model has the advantage of being explicitly recognised under the Limited Partnership Fund Ordinance and is gaining traction for RWA tokenisation in Hong Kong.

The SQMU standard’s 1 m² = 1 token principle maps directly to the SPV’s or LPF’s share/unit capital. If a property has a total area of 1,000 m², the SPV issues exactly 1,000 shares, and each SQMU token corresponds to one share. This eliminates abstraction and makes valuation transparent.

Land Registration Considerations

Because legal title to land cannot be transferred via blockchain tokens under current Hong Kong law, the SPV must be registered with the Land Registry as the legal owner. Token holders are shareholders of the SPV, not direct property owners. This structure is legally sound and aligns with the SFC’s see‑through approach: the token represents a security (shares in the SPV), and the SPV holds the real estate.

The SQMU Advantage for Hong Kong Tokenisation

The open‑source SQMU standard is designed to align with Hong Kong’s regulatory expectations. Key features include:

1. Transparency and Auditability

SQMU’s open‑source smart contracts allow regulators, auditors, and investors to inspect the code and verify that total supply matches the certified area, that no hidden minting functions exist, and that compliance controls (e.g., whitelist, transfer restrictions) are correctly implemented. This aligns with the SFC’s emphasis on transparency and investor protection.

2. Whitelist Controls for Compliance

SQMU contracts can enforce whitelist controls, ensuring that only KYC‑verified wallets can hold tokens. This meets the SFC’s requirements for investor onboarding and transfer restrictions.

3. Non‑Transferable SQMU‑R Tokens (for Rental Epochs)

For rental income distribution, SQMU‑R tokens are non‑transferable, reducing regulatory complexity. Investors cannot trade SQMU‑R on secondary markets, avoiding the need for VATP licences for those tokens.

4. Per‑Square‑Metre Determinism

Hong Kong property title deeds specify the exact area of each unit. By anchoring each token to a verified square metre, SQMU eliminates abstraction and makes valuation transparent.

5. EVM Flexibility

SQMU is deployed on Arbitrum and Base, two leading layer‑2 networks. For Hong Kong offerings, providers may choose to deploy on a permissioned EVM chain or add additional controls (e.g., whitelist, transfer restrictions) to comply with SFC guidance on blockchain selection.

How SQMU Consulting Helps Clients Navigate SFC Licensing

Our consulting services provide end‑to‑end support for real estate tokenisation projects in Hong Kong, covering every stage from initial assessment to post‑launch compliance.

1. Regulatory Assessment and Licensing Strategy

Token classification: We help clients determine whether their token constitutes a security under the SFO, using the SFC’s case studies and legal principles.
Licensing pathway: We identify the optimal licensing route—Type 1/Type 7 (VATP), Type 4 (advisory), Type 9 (asset management), or exemptions—based on the offering structure and target investors.
Jurisdictional mapping: For cross‑border offerings, we assess how Hong Kong rules interact with foreign regulations (e.g., for mainland Chinese assets).

2. Legal Structuring and Documentation

SPV or LPF formation: We coordinate with Hong Kong law firms to incorporate the appropriate legal vehicle, draft constitutional documents, and ensure alignment with token economics.
Offering documents: We assist in preparing offering memoranda, tokenholder agreements, and disclosure documents that meet SFC requirements.
Legal opinions: We obtain opinions confirming the token’s classification and the enforceability of token holder rights.

3. Licensing and Regulatory Liaison

SFC licence applications: We prepare and submit licence applications (Type 1, 4, 7, 9, and VATP), including fit‑and‑proper declarations, business plans, and compliance manuals.
Prior consultation: For novel structures, we assist with prior consultation with the SFC, as required under the Tokenised Investment Products Circular.
Sandbox applications: For innovative models that do not fit neatly within existing rules, we advise on applying for the SFC’s regulatory sandbox.

4. Smart Contract Compliance

Open‑source SQMU contracts: We customise the SQMU contracts to enforce compliance rules such as whitelist controls, transfer restrictions, and jurisdictional caps.
Audit and verification: We coordinate smart contract audits and publish audit reports as part of offering documentation.
Blockchain selection: We advise on appropriate blockchain selection (permissioned vs. permissionless, public vs. private) to comply with SFC guidance.

5. Investor Onboarding and KYC/AML

Whitelist management: We implement whitelist controls that restrict token holding to KYC‑verified wallets.
Compliance integration: We integrate with licensed KYC providers to automate identity verification and sanctions screening.
Ongoing monitoring: We help establish transaction monitoring and suspicious activity reporting procedures.

6. Stablecoin Integration

Licensed stablecoin selection: We advise on the use of HKMA‑licensed stablecoins (once issued) for payments and distributions.
Compliance with Stablecoins Ordinance: We ensure that any stablecoin integration complies with reserve, redemption, and disclosure requirements.

7. Post‑Launch Support

Reporting and disclosures: We assist with ongoing reporting obligations, including financial statements, token holder composition, and material changes.
Secondary market compliance: For tokens traded on licensed VATPs, we ensure that transfer restrictions and cap table management remain compliant.
Upgrades and amendments: As regulations evolve, we help clients upgrade smart contracts or adjust compliance parameters.

Getting Started

If you are considering tokenising real estate in Hong Kong, the first step is a structured assessment. SQMU consulting offers an initial consultation to:

Evaluate your property and business objectives.
Determine the regulatory pathway (public offer, private placement, or VATP listing).
Outline the licensing requirements and timeline.
Provide a cost estimate for legal, technical, and compliance services.

To begin, please contact us via the consulting enquiry form on our website. Include a brief description of your asset, target investor profile, and timeline.

Hong Kong SFC Licensing for Security Token Offerings: Consulting Support

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