Hong Kong is moving towards becoming the first region in Asia to establish clear regulations allowing insurance companies to invest in cryptocurrencies, according to a Bloomberg report.
The Insurance Authority of Hong Kong (IA) is proposing new rules, allowing insurance capital to invest in digital assets, including cryptocurrencies and stablecoins.
Turn on the green light cautiously, not a prohibition
According to this proposal, crypto assets will be subject to a risk fee of up to 100%, meaning insurance companies must reserve an amount of capital equivalent to the value of investments in cryptocurrencies. Stablecoins will be classified differently, with risk fees based on the fiat currency to which they are pegged.
The draft will be open for public consultation from February to April 2025, after which it will be submitted to the legislative level. The central bank of Hong Kong is also expected to issue the first batch of stablecoin licenses at the beginning of next year, contributing to creating a synchronized regulatory environment for major organizations to access cryptocurrency.
A 100% risk fee may make some feel restricted, but according to experts, this is a move of acceptance rather than prohibition. The insurance industry in Hong Kong recorded total premium revenue in 2024 reaching about 635 billion HKD (82 billion USD) from 158 licensed insurance companies. Just a small portion of this capital flow invested in the cryptocurrency market could significantly increase institutional liquidity.
The new framework also has a capital incentive policy for investments in infrastructure in Hong Kong and mainland China, particularly projects developing the 'Northern Metropolis' area near the Chinese border. This shows that cryptocurrency regulations are part of a larger policy aimed at mobilizing private capital to serve the government's priorities.
The gap between areas is becoming increasingly large
Hong Kong's approach is distinct from many other major financial centers in Asia. Singapore currently prohibits the purchase of cryptocurrencies using credit cards and promotional incentives. Retail investors must pass risk awareness tests before being allowed to trade. South Korea is also gradually lifting the ban on organizations since 2017, allowing non-profit funds and listed companies to trade by the end of 2025. However, banks and insurance companies are still not allowed to hold cryptocurrencies directly. In Japan, the current regulations in the insurance sector do not yet permit investment in cryptocurrencies, although changes may be considered by 2026 to expand investment products for organizations.
This difference helps Hong Kong become the largest gateway for organizations in the region to access cryptocurrency investment. The city is also strongly promoting a legal framework for digital assets, having approved spot Bitcoin and Ethereum ETF funds since the beginning of this year.
What is outside the scope of insurance companies
Businesses participating in the market in Hong Kong will closely monitor the consultation process to see if there will be adjustments to the risk fee or an expansion of the types of assets allowed for investment. Some companies are also lobbying to expand into infrastructure projects, rather than being limited to just a few options as is currently the case.
If officially implemented, Hong Kong's framework could serve as a model for other countries in Asia to reference when opening cryptocurrency investment for organizations, thereby accelerating the application process in the region.