What licenses and qualifications are required to operate Gamefi, a blockchain game, in Hong Kong?

What are the necessary licenses and qualifications for running a blockchain game, such as Gamefi, in Hong Kong?

For various reasons, domestic blockchain games have been criticized as “not true blockchain games.” For entrepreneurs who want to operate authentic blockchain games, operating them in Hong Kong has become an alternative. How to operate a blockchain game in Hong Kong in compliance? The first problem to be solved is whether there are entry barriers to operating blockchain games in Hong Kong.

Do Hong Kong blockchain games require a financial license?

According to lawyer Man Kuen, it is not necessary.

In terms of transaction scenarios, blockchain games may involve transactions of tokens, NFTs, and other virtual assets in the game. However, the buying and selling of these virtual currencies or virtual assets do not occur within the embedded functions of the blockchain game, but through centralized exchanges (CEX) or decentralized exchanges (DEX). Therefore, the application for a financial license has little to do with the blockchain game itself.

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In terms of regulatory logic, the main regulatory authority for virtual currencies or virtual assets in Hong Kong is the Securities and Futures Commission (SFC). From the activities and service scope of regulated activities such as 1st, 4th, 7th, 9th, and VASP licenses related to virtual assets publicly released by the SFC (see the table below), its regulatory scenarios are limited to financial transaction scenarios, and the regulatory purposes are to protect investors’ rights and maintain financial order. It is difficult to classify players of blockchain games as investors in the general sense, and their scale and behavior in buying and selling game tokens are unlikely to affect financial order in the general sense. Therefore, even if the blockchain game embeds the buying and selling function of virtual currencies or virtual assets, its “small-scale” activities are unlikely to attract the attention of the SFC.

What licenses do Hong Kong blockchain games need?

When operating games in China, generally a Network Culture Operation License, a Value-Added Telecommunications Services Operation License, and a Game Approval Number are required. Are there similar licenses in Hong Kong for operating games?

1. Is it necessary to apply for a Services-Based Operator License?

Under the Hong Kong Telecommunications Ordinance, Services-Based Operator Licenses are divided into three categories: Category 1 and Category 2 services are based on local voice telephony services, and Category 3 services are based on value-added and mobile communication services.

However, under Hong Kong law, Services-Based Operator Licenses are usually related to companies that provide telecommunications services or internet services, and online games are usually seen as content providers rather than operators that provide telecommunications or internet services. Therefore, it is generally not necessary to apply for a Services-Based Operator License.

1. Is it necessary to apply for a Game Approval Number?

Unlike China, Hong Kong does not have a game approval system. Therefore, it is not necessary to apply for a Game Approval Number.

1. What licenses are required for gambling-related gameplay?

According to the Hong Kong Gambling Ordinance, only lotteries, gambling games, or contests conducted by the issuance of licenses are considered legal gambling activities. However, the current entertainment licenses related to gambling under Hong Kong law, such as entertainment game licenses and promotional contest licenses, are aimed at the existing traditional gambling framework in Hong Kong, such as the Jockey Club. In short, blockchain gaming involving gambling cannot obtain licenses for compliance because there are no licenses to apply for. Therefore, lawyer Man Qun suggests that even when operating blockchain gaming in Hong Kong, it is advisable to avoid gambling-related gameplay.

What else should be considered when operating blockchain gaming in Hong Kong?

Understand your customer (KYC). Whether it is for web2 games or web3 games, KYC is an important measure to ensure the compliant operation of gaming platforms and the security of user assets. The main reasons are as follows:

1. Protecting minors: Verifying the identity of players to protect minors from inappropriate game content or gambling activities.

2. Reducing legal liability: Game operators have a legal responsibility to ensure that users’ activities on gaming platforms are legal and compliant. If improper behavior occurs, such as gambling or other illegal activities, the project may be held legally responsible. KYC can help reduce legal risks.

3. Cooperating with financial regulation. Cooperating with the Hong Kong Monetary Authority (HKMA) in regulating illegal activities such as money laundering and financing terrorism.

Recommendation from lawyer Man Qun

In summary, when operating blockchain gaming in Hong Kong, although there is no need for a financial license or value-added telecommunications business operation permit, and even not limited by game licenses, it is still necessary to avoid gambling-related gameplay and implement KYC to ensure compliant operation.

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