Mainland financial players eye HK virtual asset chances

Chinese mainland brokerages with international operations are ramping up efforts to secure virtual asset trading licenses from Hong Kong's securities regulator, with the aim of capitalizing on the city's push to become a global innovation hub for digital assets and serving more international investors.

Industry insiders told China Daily that this trend would enhance liquidity of the special administrative region's financial markets and channel mainland capital into global virtual asset markets through Hong Kong, while also accelerating the alignment of mainland's financial regulations with international standards.

Guotai Junan International, a subsidiary of Shanghai-based Guotai Haitong, recently received a greenlight from the Hong Kong Securities and Futures Commission (SFC) to upgrade its Type 1 license for dealing in securities, which allows the firm to offer virtual asset trading services and related advisory services.

The announcement made a big splash in the market, given that the parent company is partially owned by the State-owned asset regulators of Shanghai and Shenzhen.

Tom Chan Pak-lam, a director at the Institute of Securities Dealers in Hong Kong, said the involvement of a State-backed institution signals that the central government may take a positive view of Chinese brokerages participating in virtual assets outside the mainland, which is an encouraging message for the market.

Soon after, TF International Securities — with a mainland owner — also secured SFC approval to provide virtual asset trading services through omnibus account arrangements. Its peers, including China Merchants Securities International, are reportedly preparing to apply for similar license upgrading.

Under current regulations, authorized brokers can establish omnibus accounts on licensed virtual asset trading platforms — now 11 in Hong Kong — and offer clients regulated access to major cryptocurrencies such as bitcoin, ethereum and stablecoin.

License upgrading "is undoubtedly an important signal for traditional financial institutions", said Jeffrey Ding, chief analyst of HashKey Group, an Asian digital asset financial services firm.

It demonstrates the growing readiness of established financial institutions in regulation and technical capabilities to participate in the virtual asset market, while it also reflects that Hong Kong's regulatory environment is becoming more mature, creating the conditions for these traditional players to conduct business in this innovative field, Ding said.

He added that more conventional financial institutions are expected to follow suit and assess their capabilities and business in digital asset custody, trading and issuance, so as to tap into the opportunities of fintech innovation.

Alvin Ngan, an equity strategist at Zhongtai Financial International, said the core edge of mainland brokerages is to act as a bridge between mainland resources and the markets of Hong Kong.

These firms could facilitate the establishment of a regulated cross-border channel, enabling mainland capital to participate in the global virtual asset market through Hong Kong. This would promote the integration of mainland financial rules with international standards, Ngan said.

As for international investors in Hong Kong, HashKey's Ding said that mainland financial players will offer them a broader range of compliant virtual asset products within the local market.

However, given that virtual currency trading remains prohibited on the mainland, Chinese mainland brokerages venturing into Hong Kong SAR markets will adopt a measured approach over the short term, Ngan said.