After the circular issued on May 22 regarding licensed institutions in Hong Kong serving mainland Chinese investors, market sentiment became tense: If regulators are going to "close the gate," what will happen to existing mainland clients, and will new clients still be able to open accounts? Especially for institutions that have already obtained licenses and are preparing to expand their business with Chinese ID holders, everyone is waiting for an answer. On June 10, the Hong Kong Securities and Futures Commission provided its interpretation and frequently asked questions, essentially clarifying the previously vague regulation: on one hand, regulators clearly stated that Hong Kong licensed companies can continue to provide services to existing mainland clients; on the other hand, in the frequently asked questions (question nine), it is specified that as long as all existing account opening rules are met, new accounts can still be opened for mainland Chinese investors, with no additional restrictions or special exemptions introduced. It appears that the business space has been preserved, but the conditions have been articulated more calmly—these services must ensure that they "are not provided within the territory of mainland China," meaning the license can still be used, clients can still be served, but the entire business must firmly remain on the "offshore" side. The crucial line drawn is not about who the clients are, but rather where the services occur.
Continuing Contact with Existing Clients: Pressing Pause on Risk Elimination
If saying "new accounts can still be opened" confirms the future entry point, then "existing mainland clients can continue to be served" preserves the bridge that has already been built. In the explanation on June 10, the Hong Kong Securities and Futures Commission explicitly allowed licensed companies to continue providing services to existing mainland clients, as long as "the related services are not provided within the territory of mainland China." Within this regulatory context, mainland Chinese investors are identified as those clients using a Chinese resident ID and/or Chinese passport as identification documents, meaning that the part of mainland individual accounts accumulated by brokers, asset managers, and virtual asset trading platforms over the years will not be abruptly wiped out due to the circular's implementation.
This statement is important for licensed institutions as it directly counters the previously most alarming concern: whether they must focus on "cleaning out" mainland clients. Following the issuance of the circular on May 22, especially in the virtual asset trading platform sector, there was speculation that regulators might be preparing to unify an exit strategy. If required to cease services, not only would the management scale and handling fee income be instantly slashed, but more troublingly, trust in the Hong Kong license as a "long-term commitment" could backfire. Now, the answer given by the SEC is that contact can continue, and business can proceed, but the condition must be firmly locked on "offshore"—the location of service cannot be within mainland China. For institutions that already have a certain customer base on the mainland, this is equivalent to obtaining a safety clause for the continuation of their business: the relationships and assets built up over the past few years can be maintained, and the compliance key shifts from "can you serve these people" to "where are you and how are you serving these people."
The Door for New Accounts is Not Completely Closed: New Accounts Can Still Be Opened Under Compliance Conditions
If saying "existing clients can continue to be served" is a reassuring token for institutions, then item (nine) in the frequently asked questions on June 10 addresses another more pressing question: can new clients still be accepted? The SEC's statement is quite direct—Hong Kong licensed companies can continue to open new accounts for mainland Chinese investors, and this category of "mainland investors" is clearly defined as those using a Chinese resident ID and/or Chinese passport for identification documents. This means that regulators have not closed the door at the identity level; individuals holding mainland documents still have the opportunity, in principle, to open a brand-new account with licensed institutions in Hong Kong.
However, this door has not been reopened, but rather locked back into the existing compliance framework. The frequently asked questions clarify that new accounts must fully comply with all existing account opening regulations; the circular and interpretation did not introduce any new exemptions or relaxations of conditions, nor did it open up a special channel for "new client competition." Meanwhile, the SEC repeatedly emphasizes in the same interpretation that the relevant services must not be provided within mainland China, drawing a red line with "the related services are not provided within the territory of mainland China." This means that even if new accounts can be opened for holders of mainland ID cards or passports, the actual methods of reaching and servicing these individuals must necessarily avoid the prohibited zone of "providing services within the territory" and rely more on cross-border connections from an offshore perspective, remote processes, or investors traveling to Hong Kong to complete key steps. The imagination for new account business is preserved, but every step must carefully follow this compliance main line concerning the service location.
The Red Line is Drawn by Geographical Location: Services Cannot Cross the Shenzhen River
The interpretation that "the related services are not provided within the territory of mainland China" shifts the regulator's focus to "where the service occurs," rather than "which identification documents the client holds." In other words, Hong Kong licensed institutions are not prohibited from conducting business with holders of mainland IDs and passports, but are required to lock all key service activities within the jurisdiction of Hong Kong or other offshore areas, ensuring that the business does not "land" in mainland China in both a physical and legal sense. For Hong Kong, which has long positioned itself as an offshore financial center, this statement reaffirms: you can provide offshore services for mainland funds, but the premise is that the entire service chain must be firmly framed within the Hong Kong regulatory system, avoiding stepping into the regulatory area for cross-border provision of financial services by mainland China.
The real challenge lies in the execution level: what counts as "providing services within the territory"? The circular does not enumerate each item, and responsibility shifts back to the institution's own risk assessment. Can the sales team be stationed in Shenzhen, giving product talks to clients via video? Hosting roadshows and presentations in mainland China—would it be seen as providing services within the territory? Customer service and investment advisors sitting in offices on the mainland taking calls, technical teams placing key system nodes and risk control servers in mainland cities—these arrangements may all be scrutinized in the future. Licensed institutions have no choice but to rethink every detail of remote service and marketing outreach: Is the promotion of the APP and website considered "clients coming to us" or "the institution proactively targeting mainland clients"? Will employee business trips, office locations, and outsourced teams inadvertently shift the focus of services back to the mainland? Under the new boundary of "offshore is permissible, but restricted onshore," business aimed at mainland investors will be forced into a more purist model—clients can cross the Shenzhen River to receive services in Hong Kong, but the service itself cannot cross back over the Shenzhen River, and the institution must prove this at every touchpoint.
Virtual Assets and Traditional Finance Answering the Same Question: A Circular Governing Both Ends
More subtly, this "offshore permissible, onshore restricted" constraint is not a special regulation directed exclusively at virtual asset platforms but rather a uniform question that looms over all licensed institutions in Hong Kong. The circular issued on May 22 begins by broadly defining the subjects to which it applies: whether licensed institutions engaged in traditional securities and funds or new license holders involved in virtual asset businesses, as long as the service targets are mainland Chinese investors, they must answer the two questions of "where is the service being provided and how is it reaching clients" under the same framework. The further interpretation on June 10 intentionally avoids distinguishing "which type of asset is more sensitive," but focuses on two main lines—whether existing clients can continue to be served and what constitutes "providing services within the territory of mainland China"—offering a unified standard.
This writing breaks a potential expectation previously held in the market: many originally thought that traditional financial businesses had a relatively mature set of boundary rules for the mainland, while virtual asset platforms might need to have an additional layer of "special restrictions" imposed upon them. Especially in the field of virtual assets, Hong Kong had previously released an open stance, and the industry was both concerned about a sudden tightening of direction and hopeful about whether additional exemptions could be obtained for mainland clients. However, what ultimately emerged was another choice: the circular and interpretation clearly allow for continued service to existing mainland clients and open new accounts for mainland investors under existing account opening rules but do not introduce any additional relaxations for any asset category, repeatedly emphasizing the bottom line that "the related services are not provided within the territory of mainland China." For both virtual assets and traditional finance, this is both an opportunity and a restriction: on the one hand, mainland investors are not completely shut out of the door, and there is still room for business in the Hong Kong offshore market; on the other hand, all institutions are locked into the same red line regarding service locations, eliminating the fantasy of pursuing special channels through "emerging assets," with the real difference remaining only whether they can operate their businesses and risk controls sufficiently "offshore" and demonstrably.
Business Space Is Framed: The Opportunities and Constraints of a Hong Kong License
Returning to the starting point, this regulatory action from the circular issued on May 22 to the interpretation on June 10 sends a core signal to licensed institutions that is quite restrained: serving mainland Chinese investors has not been completely banned but has been placed into a compliance "box" with clearer boundaries—existing clients can continue to be served, new accounts can still be opened as long as existing account opening regulations are satisfied, but all services must be proven to be "not provided within the territory of mainland China." This means that the value of the Hong Kong license has not suddenly diminished; rather, the imaginative space in the previously vague areas has been condensed into a single direction of "offshore permissible, onshore difficult." Moving forward, licensed institutions must reorganize their strategies within this box: in terms of client structure, they must more finely distinguish between different identification types and risk preferences; regarding client acquisition methods, they must shift from cross-border outreach to how to naturally guide clients to the Hong Kong side; in terms of compliance investment, they must concentrate resources on processes, documentation, and risk controls that prove "the service location is in Hong Kong," rather than fantasizing about securing exceptional clauses. Looking forward to regulatory interactions between Hong Kong and the mainland in the coming years, the specifics may be adjusted continuously with market practices, but the overall framework has already been written in this circular: Hong Kong will continue to act as an offshore financial center interfacing with mainland regulatory red lines. The industry’s task is not to gamble on fluctuating regulations but to search for the existing growth and structural upgrading opportunities that still exist along this clear and continually refined boundary, with compliance as the minimum common denominator.
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