Challenges and Opportunities of OTC Trading in Hong Kong's Virtual Assets

As a globally renowned free port and international financial center, Hong Kong has already established a thriving crypto-economic ecosystem even before the official policies were introduced. Among them, virtual asset OTC trading service providers (VAOTC) operate through offline stores and online groups, working alongside local and overseas virtual asset trading platforms to provide token exchange and deposit/withdrawal services for Hong Kong investors.

However, due to the anonymity and cross-border characteristics of blockchain technology, various cryptocurrencies related to criminal activities, especially stablecoins, can easily flow into the Hong Kong crypto ecosystem. This not only causes fund contamination for local operators and ordinary investors' businesses but also brings legal and compliance risks.

Recent Case Analysis

In March 2025, a mainland university student participated in a "card connection back to U" style money laundering activity in Hong Kong. The student purchased 2396 USDT through a local exchange shop and transferred it to a designated blockchain address. Subsequently, the funds flowed into a merchant address associated with the Southeast Asian fraud industry.

Investigations show that this is just the tip of the iceberg of a highly industrialized large-scale money laundering organization. This organization has been active since 2024, with its initial funding sources related to a large number of high-risk addresses in Southeast Asia's black and grey markets. In less than three months, this single money laundering group has illegally laundered over $310,000 in Hong Kong. Considering the undetected activities of other groups, the actual scale may be even more astonishing.

Evolution of Regulatory Frameworks

At present, the global regulatory framework for OTC traders has not yet been fully unified. However, major OTC operating locations such as Hong Kong have begun to formulate relevant legislation and licensing management regulations.

In February 2024, the Hong Kong Financial Services and the Treasury Bureau published a legislative consultation document regarding virtual asset OTC Trading services. The document proposed to introduce a licensing system for OTC Trading operators through the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), aimed at ensuring that these companies meet compliance requirements such as Anti-Money Laundering (AML) and Know Your Customer (KYC).

Strategies for Industry Operators

In face of the forthcoming OTC compliance policies, operators in the virtual asset OTC Trading industry need to actively respond:

1. Strictly adhere to the licensing system and improve the internal compliance system.
2. Strengthen communication with regulatory agencies to stay updated on the latest policy developments.
3. Participate in industry self-regulatory organizations to promote the standardized development of the industry.
4. Implement strict customer due diligence and transaction monitoring, rejecting funds involved in illegal activities.
5. Continuously improve compliance levels and enhance competitiveness.

Future Outlook

The upcoming OTC compliance policy in Hong Kong provides an important opportunity for the standardized development of the virtual asset OTC trading industry. Operators should seize this opportunity, actively adapt to changes in the regulatory environment, and continuously improve their compliance levels. Only in this way can they achieve long-term and stable development in Hong Kong, a market thriving in the crypto economy, and contribute to the healthy development of the entire industry.