Hong Kong advances virtual asset regulation framework

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Hong Kong strengthens crypto regulation

New licensing regimes for VA dealers and custodians

The Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) have published consultation conclusions on proposed legislation to regulate VA dealing and custodian service providers. With broad market support, authorities will proceed with the new licensing regimes, which are designed to complete Hong Kong’s virtual asset regulatory framework under the SFC’s ASPIRe roadmap.

Under the proposals, VA dealers will be regulated in a manner closely aligned with Type 1 (dealing in securities) activities under the Securities and Futures Ordinance, with similar exemptions under consideration. Meanwhile, VA custodians will be subject to a dedicated regime focused on mitigating risks related to the safekeeping of private keys and ensuring the protection of client assets held in Hong Kong.

Market participants are encouraged to engage early with the SFC through pre-application discussions to better understand compliance expectations and prepare for the new requirements.

Expanded oversight for VA advisory and management services

In response to industry feedback, the FSTB and the SFC have also launched a further consultation to expand licensing requirements to cover VA advisory and management service providers. Following the “same business, same risks, same rules” principle, the proposed framework mirrors existing rules for securities advisors and asset managers, giving the SFC broader powers to supervise standards across the VA sector.

The Chief Executive Officer of the SFC, Ms Julia Leung, said: “The significant progress in our VA regulatory framework ensures Hong Kong remains at the global forefront of digital asset market developments by fostering a trusted, competitive and sustainable ecosystem. With unwavering commitment to responsible innovation, we are laying the foundation for a vibrant yet resilient ecosystem that may bring vast benefits to Hong Kong's financial markets and the broader economy in the long run.”

The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said: “Our proposal for establishing licensing regimes for VA dealing and custodian service providers marks a significant step in enhancing our legal framework for digital assets. The proposed licensing regimes strike a prudent balance among fostering market development, managing risks and protecting investors. They will help realise our vision for building a trusted and sustainable digital asset ecosystem, with a view to establishing Hong Kong as a global hub for digital asset innovation.”

Conclusion

Together, the initiatives signal Hong Kong’s intent to provide a comprehensive, internationally competitive regulatory environment that supports digital asset growth while safeguarding market integrity and investor interests.

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