HONG KONG (Dec. 25, 2025) — Hong Kong is accelerating its bid to become a tightly regulated, institution-friendly digital asset hub, outlining a path toward 2026 legislation that would bring virtual asset (VA) dealers and crypto custodians under a mandatory licensing regime. At the same time, the city’s insurance regulator is moving in parallel, weighing a capital framework that would allow insurers to hold crypto—but at a steep cost—while creating incentives for infrastructure allocations that align with government development priorities. The Business Times
Taken together, the moves signal a broader Hong Kong strategy: expand the regulatory perimeter beyond licensed trading platforms, harden investor protections and anti-money-laundering controls, and invite more “traditional finance” balance sheets into digital assets—without loosening prudential guardrails. Hong Kong Government Information
What’s new on Dec. 25: Hong Kong’s crypto rulebook is widening
Regulators confirmed that consultation conclusions have been published on legislative proposals covering (1) VA dealing and (2) VA custodian services, and that a separate one-month consultation has opened on proposals to regulate VA advisory and VA management services—an expansion prompted by industry feedback. Hong Kong Government Information
News coverage on Dec. 25 highlighted the direction of travel: new licences for dealers and custodians are being prepared for next year as the city continues its push to deepen the digital asset market, even as mainland China maintains a far tougher stance on crypto activity. South China Morning Post
The 2026 plan: a licensing regime for virtual asset dealers
A “Type 1-style” approach—applied to crypto dealing
Hong Kong’s proposal is designed to align the scope of VA dealing with the scope of Type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance—adapting familiar broker-dealer concepts for crypto markets. Treasury Bureau
Under the revised scope, the regime is intended to capture entities that, by way of business, make (or offer to make) agreements with another person—or induce another person to enter into an agreement—for the purpose of acquiring, disposing of, subscribing for, or underwriting virtual assets. Treasury Bureau
Who could be pulled into scope?
One of the most consequential clarifications: the framework is activity-based, not branding-based. That means certain firms that don’t call themselves “crypto brokers” could still fall into scope if their business model effectively intermediates VA transactions.
For example, regulators note that payment service providers that facilitate VA transactions may need a licence or registration if what they do amounts to VA dealing—such as providing conversion services that involve making or offering agreements to acquire or dispose of VAs. Treasury Bureau
What’s excluded (and why it matters)
The proposals aim to avoid duplicative licensing where existing securities or derivatives rules already apply. Regulators state that activities in derivatives and structured products referencing VAs generally fall under existing regulated activities in the securities framework, and therefore a portion of the originally proposed VA dealing definition was removed to prevent overlap. Treasury Bureau
They also emphasize that the AMLO definition of “virtual asset” excludes securities and futures contracts, so the new VA dealing regime is not aimed at firms dealing solely in tokenised securities. Treasury Bureau
Exemptions under consideration
Regulators indicate they are considering exemptions that would shape how the regime impacts market structure, including possible exemptions for:
- Transactions conducted through SFC-regulated VA dealers
- Transactions conducted as principal
- Intra-group transactions
- Use of VAs as a means of payment for goods or services
- Certain “incidental” dealing by SFC-regulated VA managers when dealing is solely for providing VA management services Treasury Bureau
Notably, HKMA-licensed stablecoin issuers conducting regulated stablecoin activity are expected to be exempt because they are already supervised under the monetary authority’s framework. Treasury Bureau
Capital, transition, and marketing: what crypto dealers should expect
Baseline capital requirements (HK$5 million paid-up capital)
Regulators plan to impose baseline financial resources requirements aligned with Type 1, including:
- Minimum paid-up share capital: HK$5 million
- Minimum required liquid capital: up to HK$3 million (depending on business model)
They also signal flexibility to impose additional requirements where necessary (for example, excess liquid capital calibrated to operating expenses). Treasury Bureau
No “deeming” period for existing firms
A key operational issue for the industry: regulators do not plan to grant a deeming arrangement for existing VA dealing service providers. The licensing regime is intended to take full effect on the commencement date of the statutory provisions—meaning firms that are not licensed/registered at that point may need to pause or restructure Hong Kong-facing operations. Treasury Bureau
Licensing fees and regulator powers
For fees, regulators plan to benchmark the application fee and annual fee for VA dealing licences/registrations with the fees for Type 1 regulated activity. Treasury Bureau
They also propose that the SFC and HKMA be granted regulatory powers in line with oversight tools used in other regimes, and that appeals be handled through the Anti–Money Laundering and Counter–Terrorist Financing Review Tribunal. Treasury Bureau
A hard line on “actively marketing” to Hong Kong
To address cross-border promotion and regulatory arbitrage, regulators plan to prohibit any person from actively marketing VA dealing services to the Hong Kong public unless that person is licensed or registered with the SFC for VA dealing. Further guidance is expected on what “actively market” means in practice (including questions around online outreach). Treasury Bureau
Crypto custody rules: licensing focused on private keys and transfer control
If the dealing regime targets how crypto is bought and sold, the custody regime targets a different risk: who controls the keys.
Hong Kong’s proposed VA custodian licensing regime is framed around managing risks tied to the safekeeping of private keys and strengthening the security of client assets. Hong Kong Government News
When is a custody licence required?
The consultation conclusions give examples that focus on unilateral transfer ability:
- A licence/registration would typically be required where a person can unilaterally transfer its clients’ virtual assets.
- A licence/registration may not be required for certain MPC (multi-party computation) arrangements where clients can transfer their own assets and can reconstruct the complete private key independently or retrieve access without the MPC provider’s support—though the document notes other MPC models could still be captured depending on the facts. Treasury Bureau
Baseline capital requirements (HK$10 million paid-up capital)
For VA custodians (other than banks subject to existing HKMA capital rules), regulators plan baseline financial resources requirements similar to those applied to certain depositary services frameworks, including:
- Minimum paid-up share capital: HK$10 million
- Minimum required liquid capital: HK$3 million
They also retain flexibility to impose additional requirements calibrated to scale. Treasury Bureau
Fees likely higher than typical SFO licences
Because custody licensing is expected to be operationally and technically complex, regulators indicate the licence application fee and annual fee for VA custodians would be no less than the current amounts applicable to Type 3 regulated activity. Treasury Bureau
Marketing ban applies to custodians too
Mirroring the dealing regime, Hong Kong intends to prohibit unlicensed entities—including overseas providers—from actively marketing VA custodian services to Hong Kong investors. Treasury Bureau
New consultation: licensing crypto advisors and crypto asset managers
Alongside the dealer and custodian proposals, regulators opened a further consultation (running to Jan. 23, 2026) to expand licensing to two additional categories:
- VA advisory service providers (modelled with reference to Type 4: advising on securities)
- VA management service providers (modelled with reference to Type 9: asset management) Treasury Bureau
This matters because many crypto business models blur the line between execution, advice, and discretionary management—especially in OTC desks, wealth channels, and “crypto-as-a-service” offerings.
Regulators also flag that these service providers would be subject to AML/CFT requirements under the AMLO, including customer due diligence and record-keeping expectations. Treasury Bureau
Insurers and crypto: 100% risk charge, stablecoin distinctions, and infrastructure incentives
While the SFC/FSTB proposals focus on market intermediaries, Hong Kong’s Insurance Authority is exploring a separate set of rules that would determine whether—and how—insurers can place capital into crypto.
The headline: a 100% capital charge on crypto exposure
Bloomberg reported that the Insurance Authority is proposing a capital framework that would impose a 100% risk charge on crypto assets, based on a regulator presentation seen by Bloomberg. Bloomberg
The same reporting notes that stablecoin investments would attract risk charges based on the fiat currency that a Hong Kong-regulated stablecoin is pegged to—signalling a more differentiated approach for regulated “digital cash” compared with volatile tokens. Bloomberg
Consultation timing and regulator messaging
The Business Times (citing Bloomberg reporting and regulator comment) said the insurer proposal could still change and is expected to be open for public consultation from February to April before legislative submissions. The Business Times
It also reported that the regulator said it had commenced a review of the risk-based capital regime with the objective of supporting the insurance industry and broader economic development, and that it was in the process of gauging feedback. The Business Times
Infrastructure: capital incentives tied to policy priorities
A notable part of the insurer framework is its linkage to infrastructure. The Business Times reported proposals for capital incentives for infrastructure investment tied to Hong Kong, mainland China, or projects listed/issued in the city, with eligible projects including developments such as the Northern Metropolis. The Business Times
China Daily Hong Kong carried similar details, including the consultation window and the distinction between crypto assets and stablecoins in the proposed treatment. chinadailyhk
Scale: an industry with significant allocable capital
Asia Insurance Review and the Business Times pointed to the size of the local insurance sector—reporting 158 authorised insurers and gross premiums around HK$635 billion in 2024—helping explain why regulators see insurer balance sheets as a potentially meaningful channel for both digital assets and infrastructure funding. The Business Times
Why Hong Kong is doing this now: ASPIRe, institutional access, and regulatory competition
Hong Kong’s moves fit within a broader regulatory narrative laid out by the SFC: the “A‑S‑P‑I‑Re” roadmap (Access, Safeguards, Products, Infrastructure, Relationships), designed to “future-proof” the city’s virtual asset ecosystem while applying a “same business, same risks, same rules” approach. SFC
Within that roadmap, the SFC explicitly frames new licensing frameworks for OTC trading and custody as core initiatives to expand the regulated market beyond trading platforms, and to build a more institution-grade structure around asset security and market integrity. SFC
Hong Kong is also making these moves against a complex regional backdrop. Mainland China continues to treat many virtual-currency business activities as illegal, and the People’s Bank of China has repeatedly signalled concern—particularly around stablecoins—from a financial stability and illicit finance perspective. Reuters
What to watch next in 2026
Several deadlines and decision points will shape how quickly this becomes operational reality:
- Jan. 23, 2026: consultation deadline for proposed regimes covering VA advisory and VA management service providers. Treasury Bureau
- 2026 legislative timetable: regulators aim to introduce a bill into the Legislative Council covering dealer, custodian, advisory, and management regimes under the AMLO. Treasury Bureau
- Guidance on “actively marketing”: regulators say further guidance will be issued to clarify what marketing into Hong Kong entails for both dealing and custody services. Treasury Bureau
- Insurer consultation (Feb–Apr 2026): expected public consultation on the Insurance Authority’s proposed crypto and infrastructure capital framework. The Business Times
For the market, the immediate question is whether Hong Kong can strike the balance it is signalling: broaden access and institutional participation—while keeping compliance, custody security, and capital rules strict enough to reduce the “wild west” risks that have repeatedly tested crypto markets worldwide. SFC
