Hong Kong regulators are moving forward with a more comprehensive licensing framework for crypto trading and custody, reinforcing the city’s push to integrate digital assets into its regulated financial system. On December 24, the Financial Services and the Treasury Bureau and the Securities and Futures Commission released a consultation summary outlining the next phase of oversight for virtual asset service providers.
The framework is designed to strengthen market integrity, investor protection, and operational resilience while supporting the long-term development of Hong Kong’s digital asset market. Officials emphasized continuity with existing financial regulations rather than a shift in policy direction, signaling higher compliance expectations for firms operating in the sector.
Licensing Structure for Trading and Custody Providers
Under the finalized proposals, virtual asset trading platforms will be subject to a licensing regime closely aligned with Type 1 securities dealing under Hong Kong’s Securities and Futures Ordinance. The approach mirrors traditional market oversight, applying familiar standards around conduct, governance, and risk management to crypto trading activities.
Custody service providers will face a more targeted but stricter framework, reflecting the risks associated with holding client assets. Regulators are placing particular emphasis on the control and safekeeping of private keys, an area that has been central to several high-profile failures globally. The goal is to reduce custody-related risks and strengthen safeguards for client assets across the market.
Authorities said industry feedback largely supported the expansion of regulation to include both trading and custody services. The move builds on the virtual asset trading platform licensing regime launched in June 2023, which marked Hong Kong’s first formal step toward comprehensive crypto oversight.
Market Feedback and Regulatory Refinement
The initial consultation period, which closed in August 2025, drew more than 190 submissions from market participants, industry associations, chambers of commerce, and professional bodies. While respondents broadly endorsed the regulatory direction, many called for clearer definitions and more tailored requirements reflecting the diversity of virtual asset business models.
In response, regulators refined the framework to draw sharper distinctions between trading, custody, management, and advisory activities. This separation is intended to reduce regulatory ambiguity and ensure firms are subject to obligations that align with their actual operations, a concern frequently raised by institutional participants assessing compliance risk.
From an institutional perspective, the clearer structure may lower barriers to entry by reducing uncertainty around licensing scope and supervisory expectations. It also aligns with broader global trends, as regulators seek to map crypto activities onto existing financial market frameworks.
Advisory Services, Legislation, and Global Positioning
Alongside the consultation summary, Hong Kong launched a new one-month public consultation focused on virtual asset advisory services and asset management providers. Instead of folding these activities into the trading framework, regulators now plan to oversee them under regimes similar to those governing traditional securities advisory and fund management. The consultation runs until January 23, 2026.
Officials said the overall approach aims to balance innovation with risk control while reinforcing Hong Kong’s status as an international financial center. Following the consultation, the government plans to finalize legislative proposals and submit a draft ordinance to the Legislative Council in 2026.
If enacted, the framework would further align crypto oversight with established financial market rules, raising compliance standards across the sector. For market participants, the message is clear: regulation is expanding in scope and depth, and firms operating in Hong Kong will need robust governance and compliance strategies as the digital asset regime becomes more structured.