The government in Hong Kong is getting closer to adopting a fully balanced regulatory framework for virtual assets, with the target date for the enactment of new laws governing virtual asset dealers and custodians being 2026. This was confirmed by the Financial Services and Treasury Bureau and the Securities and Futures Commission following a public consultation exercise that attracted over 190 industry submissions.
These forthcoming proposals will help create a formal framework concerning virtual asset dealing and custody services governed under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. This was supplemented by an indication from regulators that this framework will also be very much aligned with those applied in traditional securities intermediaries, indicating that Hong Kong intends to integrate its regulation of crypto assets with its traditional framework for overseeing finance.
This comes as part and parcel of Hong Kong's plans to become a premier hub for virtual assets in Asia. There has been a strong embrace of a holistic approach that will ensure fostering of innovation while at the same time having robust protections for investors. This comes at a time when mainland China has a restrictive policy towards cryptocurrencies.
There has been regulatory steam building throughout this year. The SFC had established licensing requirements for over-the-counter trade in virtual assets and is assessing derivative products and margin transactions in digital assets. In addition, there have been approved staking services offered in licensed platforms and funds. Spot exchange-traded funds for cryptocurrencies have been in operation since 2024.
When it comes to the proposed framework, it is clear that custodians will have requirements on private key protection and client asset protection, and this would include dealer requirements that adopt traditional standards expected of securities firms. All these measures can be referred to as part of the overall plan of the SFC's roadmap for ASPIRe.
On the same note, the SFC has recently conducted a consultation on regulating virtual asset advisers and asset managers. This move is based on the concept of same business, same risks, same rules implementing the same standards as in traditional advisory and fund management services. The deadline to respond to this consultation is January 23. As legislation is expected to be introduced as early as 2026, it seems that a long-term commitment for the regulated development of digital assets in Hong Kong is emerging a reflection of the territory's dedication to clarifying the defined environment as a global financial hub that is adapting to "the next phase of finance."
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