Is KYC required in Hong Kong for selling Bitcoin?

Key Takeaways

• Due to the decentralized nature of crypto, the SFC requires licensed Virtual Asset Trading Platforms (VATPs) and licensed brokers to strictly enforce KYC (Know Your Customer) and CDD (Customer Due Diligence) to verify client identity and fund sources, and protecting investors and preventing illegal financial activities.
• Selling cryptocurrency without KYC in Hong Kong is generally not recommended and is becoming more difficult as regulation in HK has matured. 
• You can legally withdraw cryptocurrency in fiat currency in Hong Kong by picking a SFC-licensed platform and completing their KYC, depositing your cryptocurrency from your crypto wallet, converting your crypto to a fiat currency, and then withdrawing your funds to your linked bank account. 

In this article, we will explain what is KYC (Know Your Customer), why it is required for cryptocurrency in Hong Kong and how to legally withdraw (off-ramp) crypto. 

What is Know Your Customer (KYC)?  

KYC (Know Your Customer) is a mandatory compliance process used to verify the identity of a person or an organization. The primary purpose of KYC is to prevent illegal activities such as fraud and money laundering, it is an essential tool in Anti Money Laundering (AML) and Counter Terrorist Financing (CTF). 

KYC is commonly used by financial institutions during account opening, as it helps them to assess the risk of onboarding the client. The KYC process usually includes verifying your passport or ID card and providing a proof of address such as a bank statement. This information helps businesses ensure that the client is who they claim to be. 

Why is KYC required for digital currency in Hong Kong?

Due to the decentralized nature of cryptocurrency, KYC protocols are applied strictly to virtual assets. By verifying the true identity of the client, it ensures that the account is owned legitimately by a compliant user, as authorities can easily track the source and destination of a client’s funds, greatly preventing illegal financial activities. 

In Hong Kong, the SFC (Securities and Futures Commission) has established a strict regulatory standard for crypto exchanges, aiming to best protect the interests of investors. Licensed Virtual Asset Trading Platforms (VATPs) are required to conduct Customer Due Diligence (CDD) on their clients. CDD is a key part of the KYC process where businesses conduct a background check on clients, verify their source of funds, and understand their purpose for opening an account.

Can I sell my cryptocurrency without KYC in Hong Kong? 

Selling cryptocurrency without KYC in Hong Kong is generally not recommended and is becoming more difficult as regulation in HK has matured. 

All licensed Virtual Asset Trading Platforms (VATPs) and licensed brokers are required by the Securities and Futures Commission (SFC) to conduct extensive KYC and customer due diligence (CDD). Therefore, trading without KYC on these platforms is not possible.

For smaller transactions, some money exchanges with an MSO (Money Service Operator) license might provide on/off ramp services with no KYC required. However, they might not be fully licensed to provide Virtual Asset related services. An MSO license strictly refers to traditional money changing and remittance services, for someone who is not familiar with virtual assets, they might confuse these money exchanges with SFC-licensed VA service providers. 

Using a non compliant service provider might attract the attention of authorities and you could be required to further explain the source of your funds, it is possible that your funds will be held or frozen during the investigation. When choosing a VA platform, one should pay attention to what kind of license they hold. 

How to withdraw (off-ramp) cryptocurrency legally in Hong Kong?

You can legally withdraw cryptocurrency in fiat currency in Hong Kong by following these 4 simple steps: 

1. Pick a SFC-licensed platform such as a Virtual Asset Trading Platform (VATP) and licensed broker. Open an account and complete the Know Your Customer (KYC) process.
2. Deposit your cryptocurrency from your crypto wallet to the platform. You can skip this step if you are buying and selling on the same platform. 
3. Convert your Bitcoins or other crypto to a fiat currency. 
4. Link your Hong Kong bank account to the platform and withdraw your funds as fiat currency. 

Before you choose a platform, it is important to first make sure that platform lists the cryptocurrency you wish to buy or deposit. The SFC has strict policies for which virtual assets are allowed for trading. 

The two most commonly used Virtual Asset Trading Platforms in Hong Kong are: 

1. OSL Exchange (OSL Digital Securities Limited)
2. HashKey Exchange (Hash Blockchain Limited) 

They are both fully licensed and regulated by the SFC. 

Frequently Asked Questions