Hong Kong is set to finalize proposals aimed at regulating virtual asset dealers and custodians, with plans to submit these regulations to the city’s Legislative Council by 2026, as announced on Wednesday by the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC).
These proposals, which emerged from a two-month public consultation that garnered over 190 responses, aim to establish a licensing framework for virtual asset dealing and custodial services. The new rules will be governed under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and will be aligned with the current regulations for securities trading.
Hong Kong’s government is actively creating a regulatory landscape to foster the growth of the city’s cryptocurrency industry with the goal of positioning it as Asia’s preferred crypto hub, rivaling Singapore. This approach stands in sharp contrast to China’s recent moves to intensify its crackdown on virtual currencies.
In February, the SFC unveiled new licensing frameworks for over-the-counter trading and initiated a review of derivatives and margin trading concerning virtual assets. In April, it approved staking services for licensed exchanges and funds, albeit with stringent asset control and risk disclosure requirements. Additionally, spot crypto exchange-traded funds have been operational since 2024.
The proposed custodian regulations will focus on safeguarding private keys and ensuring the protection of client assets, while the dealer regulations will align with the licensing expectations for securities intermediaries. These efforts are part of the SFC’s broader ASPIRe roadmap that aims to enhance access to regulated virtual asset markets.
The SFC has also launched a consultation to expand regulatory oversight to virtual asset advisers and managers. This new regime will adhere to the “same business, same risks, same rules” principle, applying standards similar to those in securities advisory and asset management services. Feedback on this consultation is due by January 23.
