The recent announcement that Guotai Junan International has secured a virtual asset trading license in Hong Kong sent its stock price soaring over 80%, drawing significant market attention to the virtual asset sector. This development highlights the growing interest in regulated digital asset services among traditional financial institutions.
Only four listed companies currently hold virtual asset-related licenses in Hong Kong: OSL, Guotai Junan International, Futu Holdings, and UP Fintech Holding (also known as Tiger Brokers). Among these, Guotai Junan International is the first Sino-funded securities firm to receive a comprehensive virtual asset service license, marking a notable milestone in the integration of traditional finance with digital assets.
What the License Allows
According to the official announcement, Guotai Junan International upgraded its "Type 1 Securities Trading License" to include virtual asset services. The expanded license permits:
- Direct virtual asset trading services for assets like Bitcoin (BTC), Ethereum (ETH), and stablecoins such as USDT.
- Providing advisory services related to virtual asset transactions.
- Issuing and distributing virtual asset-related products, including over-the-counter derivatives, structured notes, and tokenized securities.
Since early 2024, the company has been introducing structured products based on virtual asset spot ETFs in Hong Kong and received approval from the Securities and Futures Commission (SFC) to act as an introducing agent for virtual asset trading platforms. This move aligns with Hong Kong’s broader strategy to establish itself as a virtual asset hub, especially with the SFC’s "A-S-P-I-Re" regulatory roadmap and the upcoming stablecoin regulations set for August 2025.
Following the announcement, Guotai Junan International’s stock surged dramatically, closing up 198.4% on June 25. This rally also boosted the Hong Kong Chinese Securities Companies Index by 11.75%. In the A-share market, companies like Tianfeng Securities saw their stocks hit the daily limit-up, while East Money Information rose over 10%.
Why the Market Reacted So Strongly
The intense market response can be attributed to several factors. Guotai Junan International is a subsidiary of Guotai Junan Securities, with its largest shareholder being Shanghai State-Owned Assets Supervision and Administration Commission (SASAC), which holds a 74% stake. Recent reports indicate that Shanghai SASAC plans to invest RMB 10 billion over the next five years to support financial innovation and technological development. This backing has led many to interpret Guotai Junan’s license approval as a "national strategic pilot," suggesting potential policy, funding, and resource advantages.
In contrast, other players like Futu Holdings, which has been active in the virtual asset space since 2022, are perceived differently due to their non-state-owned backgrounds. Although Futu’s Hong Kong subsidiary already offers digital asset distribution and custody services, its market narrative lacks the same symbolic weight.
Additionally, Guotai Junan International is included in the Stock Connect program, allowing mainland Chinese investors to purchase its shares through northbound trading. This access to A-share liquidity amplified the buying frenzy, especially amid growing interest in Web3 and stablecoin concepts. Futu Holdings, being listed in the U.S. and not part of the Stock Connect program, did not benefit from the same influx of capital.
Opportunities and Risks for Sino-Funded Brokerages
Guotai Junan International’s approach involves upgrading its existing license and partnering with licensed platforms to offer virtual asset services. However, most brokerages do not operate their own exchanges. Instead, they rely on established licensed platforms like HashKey through omnibus accounts. This model is also used by other firms such as Futu, Tiger Brokers, and ZA Bank.
A significant limitation is that these services are currently restricted to clients with Hong Kong or overseas identities; mainland Chinese residents are excluded. Even eligible clients must navigate complex tax declaration and compliance requirements for overseas fund channels. These barriers make the services inaccessible to the average investor.
Overseas users, who are already accustomed to global platforms like Coinbase and Binance, may find the liquidity and product variety on Hong Kong platforms less appealing. Thus, converting this new business into sustainable revenue remains a challenge for Guotai Junan International. The market’s reaction appears to be a bet on future potential rather than current profitability.
The partnership model—where brokerages provide client resources and licensed status, and exchanges offer technical expertise and market depth—creates a complementary ecosystem. This collaboration has also benefited related service providers; for example, HashKey’s platform token HSK surged over 50% in 24 hours, and OSL’s stock rose 18% to a one-year high.
Potential Vulnerabilities in the Compliance Model
While the partnership between brokerages and licensed exchanges seems mutually beneficial, it carries inherent risks. The reliance on a limited number of platforms, primarily HashKey and OSL, creates concentration risk. If a partnered exchange experiences technical failures, compliance issues, or expands its proprietary trading, the brokerages’ exposure could be significant.
Hong Kong’s regulatory framework requires brokerages with Type 1 licenses to work only with SFC-licensed virtual asset trading platforms (VATPs). Currently, only HashKey and OSL hold these licenses, leading to a lack of competition and limited liquidity. Many institutional investors in Hong Kong prefer trading on U.S. or other international platforms to obtain better prices and deeper liquidity.
Some brokerages are seeking to address these limitations by applying for their own VATP licenses or connecting with global liquidity providers. This move toward self-reliance could enhance交易 efficiency and customer experience while reducing dependency on a few platforms.
The Broader Implications for Hong Kong’s Financial Ecosystem
Guotai Junan International’s license approval is a significant step toward integrating traditional securities services with blockchain-based assets. It reflects Hong Kong’s efforts to build a compliant yet dynamic digital asset ecosystem under strict regulatory oversight.
The focus is shifting from mere speculation on cryptocurrencies like Bitcoin to the development of regulated virtual asset infrastructure. This includes stablecoins, tokenized bonds, and blockchain-upgraded financial institutions. Hong Kong aims to leverage its regulatory strengths to regain its status as a global financial hub.
The upcoming Stablecoin Ordinance and new licensing rules in August will further create opportunities for offshore stablecoin distribution. With over RMB 1 trillion in offshore yuan deposits, Hong Kong has a solid liquidity foundation to support these initiatives. Brokerages like Guotai Junan International could play a key role in distributing these products.
However, mainland China maintains a strict stance against virtual currency activities. Financial institutions and non-bank payment entities are prohibited from providing account opening, fund transfer, or settlement services for virtual asset-related businesses. Mainland investors cannot currently access these services through Hong Kong-based brokerages.
Looking ahead, qualified mainland investors might eventually participate through programs similar to Stock Connect, but for now, the barriers remain high.
Frequently Asked Questions
What does Guotai Junan International’s virtual asset license allow?
The license permits the company to offer direct trading of virtual assets like Bitcoin and Ethereum, provide advisory services for virtual asset transactions, and issue products such as structured notes and tokenized securities. This upgrade aligns with Hong Kong’s push to become a regulated virtual asset hub.
Why did the stock price increase so dramatically?
The surge is largely due to the company’s state-owned background and its inclusion in the Stock Connect program, which allows mainland investors to buy its shares. Market participants view the license approval as a strategic move backed by governmental support, creating a narrative of future growth.
Can mainland Chinese investors use these services?
No, currently only investors with Hong Kong or overseas identities are eligible. Mainland residents are excluded due to regulatory restrictions. Even eligible investors must comply with strict tax and fund transfer requirements.
How does this impact other licensed platforms like HashKey?
The partnership model between brokerages and licensed platforms benefits both sides. Brokerages gain access to technical expertise, while platforms like HashKey see increased user traffic. However, reliance on a few platforms may lead to liquidity and competition issues.
What are the risks for brokerages offering virtual asset services?
Key risks include dependency on a small number of licensed exchanges, potential technical or compliance failures at partner platforms, and limited liquidity compared to global markets. Some brokerages are seeking their own licenses to mitigate these risks.
Will Hong Kong’s virtual asset market continue to grow?
Hong Kong is actively building a regulatory framework to support virtual asset innovation, including stablecoins and tokenization. While the market is still developing, the participation of major financial institutions signals long-term potential. 👉 Explore more strategies for digital asset investment
Conclusion
Guotai Junan International’s entry into Hong Kong’s virtual asset market represents a convergence of traditional finance and digital assets. While the immediate market excitement may be driven by speculation, the long-term implications for regulated virtual asset services are significant. Hong Kong’s structured approach aims to balance innovation with compliance, offering a model for other financial centers to consider.
For now, accessibility remains limited to specific investor groups, but future developments could broaden participation. As the ecosystem evolves, the role of Sino-funded brokerages and licensed platforms will be crucial in shaping the next phase of virtual asset adoption.