Key Highlights
- Hong Kong regulators target 2026 legislation for virtual asset dealer and custodian rules.
- The proposals aim to create a licensing framework under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
- Consultations drew over 190 responses, and plans are to introduce new bill to LegCo next year.
- Hong Kong aims to establish itself as Asia’s crypto hub of choice over Singapore.
New Regulatory Framework for Virtual Assets in Hong Kong
The Financial Services and the Treasury Bureau (FSTB) and Securities and Futures Commission (SFC) of Hong Kong have outlined plans to introduce legislative proposals targeting virtual asset dealer and custodian rules by 2026. This move comes as part of a broader regulatory strategy aimed at establishing Hong Kong as Asia’s premier hub for virtual assets, contrasting with China’s intensifying crackdown on cryptocurrencies.
Consultation and Public Response
The FSTB and SFC have concluded public consultations on the proposed virtual asset regimes. These consultations garnered more than 190 responses from various stakeholders, indicating a wide range of views and concerns among participants. The feedback will be instrumental in shaping the final legislative proposals.
Regulatory Environment for Virtual Assets
The new regulatory framework is set to integrate virtual asset dealing and custodial services under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. This approach mirrors existing requirements for securities dealing, ensuring a consistent application of risk management principles across different financial sectors.
Scope and Impact
The proposed regulations will cover both dealers and custodians in virtual assets, focusing on the secure handling and storage of private keys to protect client assets. The aim is to establish robust standards that align with international best practices while fostering innovation within the industry. This move is part of a broader strategy by the SFC called ASPIRe (Accelerating the Shift into Productive Regimes), which seeks to enhance access to regulated virtual asset markets.
Additionally, the SFC has initiated a consultation to extend regulatory oversight to virtual asset advisers and managers.
These rules will follow the “same business, same risks, same rules” principle, applying comparable standards to those for securities advisory and asset management services. The public is invited to provide feedback on these proposals by January 23, 2026.
Hong Kong’s push for robust virtual asset regulations reflects its strategic position in the global financial landscape. By aligning with stringent anti-money laundering (AML) and counter-terrorist financing (CTF) measures, Hong Kong aims to attract both institutional investors and retail traders looking for a secure environment in which to engage with virtual assets.
The development of this regulatory framework is closely watched by industry players, who see it as a significant step towards legitimizing the virtual asset market. However, there are also concerns about how these regulations might impact innovation and flexibility within the sector.
