The financial landscape in Hong Kong is undergoing a transformative shift as traditional brokerage firms embrace virtual asset services through regulatory upgrades. The Securities and Futures Commission (SFC) of Hong Kong recently revealed that, as of June 24, 40 financial institutions have successfully upgraded their existing Type 1 (Securities Dealing) licenses to include virtual asset trading services under a unified account structure.
This group includes 38 securities firms, one bank, and one internet company—signaling a growing convergence between conventional finance and digital asset innovation. With Hong Kong positioning itself as an international virtual asset hub, the regulatory framework is proving attractive to established financial players seeking new growth frontiers.
First Mover: Guotai Junan International Sets Benchmark
On June 24, Guotai Junan International became the first mainland Chinese-backed securities firm in Hong Kong to obtain full authorization from the SFC to offer comprehensive virtual asset trading and advisory services. This upgrade allows it to provide a full suite of digital asset solutions, including trading, custody, investment advice, issuance, and derivatives—effectively transitioning from a traditional broker to a digital asset solutions hub.
Earlier in October 2024, TF International, a subsidiary of Tianfeng Securities, became the first state-affiliated broker in Hong Kong to receive similar approval. TF International has stated it is preparing for future expansion into RWA (Real World Assets) asset management, product design, and advisory services, with plans for further licensing upgrades aligned with government policy.
Major players such as CITIC Securities, Huatai Securities, and China Merchants Securities are also actively advancing their applications, indicating a broader strategic pivot across the industry.
Expanding Participation Among Chinese Brokers
Beyond early adopters, momentum is building across the sector:
- CITIC Securities: Actively developing virtual asset-related business initiatives
- Huatai Securities: Confirming that virtual asset license upgrades are part of its core strategy; application in progress
- China Merchants Securities: Preparing for virtual asset trading services; process underway
- Guangfa Securities: Launched its first tokenized security product
- Other participants include Haifu Securities (affiliated with East Money), Futu Securities (Hong Kong), Interactive Brokers, China Futures Securities, and ZA Bank
This wave of institutional adoption reflects a calculated move to capture value in the emerging digital economy.
Regulatory Framework: Clarity Drives Institutional Confidence
Hong Kong’s regulatory ecosystem is uniquely structured to support innovation while maintaining oversight. The SFC regulates virtual asset activities under its "same business, same risk, same regulation" principle, enhancing existing license types with additional conditions for digital assets.
Key upgraded license categories include:
- Type 1 (Upgraded): For virtual asset trading and distribution
- Type 4 (Upgraded): For virtual asset investment advisory
- Type 7 (Upgraded): For automated trading systems; requires co-holding with VASP license for full exchange operations
- Type 9 (Upgraded): For managing funds with more than 10% exposure to virtual assets
Meanwhile, the Hong Kong Monetary Authority (HKMA) oversees payment-related aspects such as stablecoins and the digital Hong Kong dollar (e-HKD), ensuring a coordinated yet segmented supervisory model.
How Virtual Asset Licenses Transform Brokerage Economics
1. Fundamental Shift in Valuation Logic
The acquisition of virtual asset capabilities is not merely an add-on—it represents a strategic revaluation of brokerage firms. As highlighted by Dongwu Securities, Guotai Junan International’s end-to-end digital asset service chain elevates its market positioning from a regional broker to a global digital finance node.
A compelling precedent exists in Robinhood, the U.S.-based retail trading platform. Since launching crypto trading in 2018, Robinhood has evolved into a major player in the digital asset space. In June of last year, it acquired European exchange Bitstamp for approximately $200 million. Today, over 43% of its transaction revenue comes from cryptocurrency—up from nearly 40% the previous year.
Driven by this diversification, Robinhood’s stock has surged nearly 6x in two years, outperforming even Coinbase. Its current market capitalization exceeds $74 billion, demonstrating how crypto integration can dramatically enhance valuation multiples.
👉 See how integrated digital asset platforms are redefining financial success metrics.
2. High-Margin Revenue Streams Emerge
Virtual asset services open doors to significantly more profitable income sources compared to traditional brokerage:
- Higher trading commissions on crypto and stablecoin transactions
- Cross-border settlement revenue via stablecoin clearing (offering efficiency gains over SWIFT)
- Structured derivative products tailored for institutional and retail clients
- Custody and staking services with recurring fee models
According to a report by Shenwan Hongyuan, these services create new international revenue channels for brokers. CITIC Securities notes that traditional institutions are now engaging across multiple layers of the virtual asset value chain:
Brokerage Services
Firms can integrate crypto trading directly into existing accounts or partner with licensed exchanges, offering seamless access to Bitcoin, Ethereum, and other major tokens.
Asset Management
With upgraded Type 9 licenses, brokers can now manage portfolios with significant virtual asset exposure—either directly or through derivatives—expanding their wealth management offerings.
Investment Banking
As blockchain-based companies seek public listings or mergers, brokers can lead IPOs, SPACs, or M&A deals, leveraging their capital markets expertise.
Trading & Advisory
Licensed firms like Guotai Junan International can now legally provide investment opinions on digital assets, creating a new consultative income stream.
Strategic Equity Investments
By investing in key ecosystem players—such as exchanges or stablecoin issuers—brokers gain early exposure to high-growth sectors.
3. Business Model Innovation and Future Frontiers
With full licensing, brokers gain first-mover advantages in next-generation finance:
- Stablecoin Issuance: Potential to issue regulated stablecoins pegged to HKD or other currencies
- RWA Tokenization: Converting real-world assets like real estate, bonds, or private equity into blockchain-tradable tokens
Tianfeng Securities emphasizes that RWA unlocks new financing mechanisms, enabling fractional ownership and improved liquidity for traditionally illiquid assets—fundamentally altering growth paradigms for financial institutions.
Practical applications already emerging include:
- Cryptocurrency custody services
- Derivatives trading on digital asset platforms
- Linking tokenized RWAs with decentralized finance (DeFi) protocols
- Using crypto as collateral for fiat loans used in traditional investing
- Analyzing yield curves in crypto markets to develop structured products
These innovations represent a fundamental departure from legacy models, opening vast strategic possibilities.
Frequently Asked Questions
Q: What does it mean for a broker to upgrade its Type 1 license?
A: It means the firm can legally offer virtual asset trading services alongside traditional securities under one account system, subject to SFC’s enhanced custody, disclosure, and risk management rules.
Q: Why are stablecoins important for brokers?
A: Stablecoins enable faster, cheaper cross-border settlements and serve as foundational rails for DeFi and tokenized assets—creating new business lines in clearing and issuance.
Q: Can Chinese brokers operate virtual asset services on the mainland?
A: Currently, mainland China restricts cryptocurrency trading. These services are being developed through Hong Kong subsidiaries under local regulations.
Q: What is RWA and why does it matter?
A: RWA stands for Real World Assets—physical or financial assets like real estate or bonds represented as tokens on blockchain. It brings transparency, liquidity, and programmability to traditional finance.
Q: Are retail investors ready for tokenized securities?
A: Growing interest in fractional ownership and 24/7 trading suggests strong potential. Institutional backing and regulatory clarity are accelerating adoption.
Q: How do virtual assets affect broker valuations?
A: They introduce higher-margin revenue, global scalability, and tech-driven growth—factors that investors increasingly reward with premium multiples.
👉 Learn how forward-thinking brokers are future-proofing their businesses with blockchain innovation.