The leading securities industry association in Hong Kong is pushing back against plans to tighten crypto licensing rules for asset managers, warning that the proposals could shut mainstream firms out of digital assets. The Hong Kong Securities and Futures Professionals Association (HKSFPA) has urged regulators to revise key elements of the draft framework now under consultation.
De Minimis Threshold Under Threat
The dispute centers on the removal of the current de minimis exemption for Type 9 asset managers. Today, licensed managers can allocate up to 10 percent of a fund’s assets to crypto after notifying the regulator, without a separate virtual asset license.
Under the new proposal, any crypto exposure, even 1 percent, would require a full virtual asset management license. HKSFPA calls this an all or nothing approach and argues that it is disproportionate to the actual portfolio risk.
The group says higher fixed compliance costs would discourage traditional managers from running small pilot allocations. That outcome would undermine Hong Kong’s stated goal of building an institutionally led digital asset hub.
Hong Kong Custody Rules and Venture Investing
HKSFPA also objects to draft rules that restrict virtual asset custody to SFC licensed providers only. The association notes that many early stage tokens and Web3 ventures are not supported by local custodians.
Industry members warn that strict onshore only custody could block private equity and venture funds from backing innovative projects. They are asking regulators to allow self custody within limits and use of qualified offshore custodians for professional investor funds.
The association argues that a flexible custody framework can protect investors while still allowing exposure to emerging crypto assets. Without such flexibility, local managers may lose ground to global competitors operating under more adaptable regimes.
Regulatory Timeline and Market Stakes
The clash comes as Hong Kong finalizes a unified virtual asset licensing regime under its anti money laundering ordinance. New licenses will cover dealing, custody, advisory and portfolio management, with implementation targeted from 2026.
Regulators say the crypto licensing changes follow a same business, same risks, same rules principle across securities and crypto. HKSFPA’s submission will test how far authorities are willing to adjust that stance to keep asset managers active in the sector.
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