January 22, 2026
By Our Correspondent
Asset managers warn that proposed licensing rules risk deterring cautious engagement with digital assets
Hong Kong’s securities industry is pushing back against planned regulatory reforms that would require traditional asset managers to obtain full virtual-asset licences even for minimal exposure to cryptocurrencies such as bitcoin.
On January 20th the Hong Kong Securities and Futures Professionals Association (HKSFPA) submitted objections to the authorities, arguing that the proposed removal of a long-standing 10% exemption threshold would impose disproportionate compliance costs. Under the new regime, a portfolio manager with as little as 1% exposure to bitcoin would need to secure a full virtual-asset management licence.
The industry body warned that this “all-or-nothing” approach would discourage conventional fund managers from cautiously exploring digital assets—undermining the government’s stated ambition to integrate Web3 with traditional finance.
Since November 2018, firms holding a Type 9 Asset Management Licence have been allowed to invest up to 10% of a fund’s value in cryptocurrencies without seeking additional approval, provided they notify the Securities and Futures Commission (SFC). The licence, standard for asset managers, hedge funds and private-equity firms, allows discretionary investment on behalf of clients without further crypto-specific compliance.
That notification-based system would be replaced under the proposed rules by a separate licensing regime under Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Managers operating without the new licence could face fines of up to HK$5m (US$640,000) and prison terms of up to seven years.
In consultation conclusions released in December 2025, the SFC stood by the removal of the threshold, arguing that uniform standards are necessary to ensure investor protection and prevent firms from structuring investments to evade oversight. The regulator said it received 101 submissions during the consultation period.
The HKSFPA has also objected to proposed custody rules that would require fund assets to be held exclusively by SFC-licensed custodians. Private-equity and venture-capital firms, the group argues, often invest in early-stage tokens unsupported by local custodians, making the requirement impractical.
The reforms form part of Hong Kong’s broader effort to position itself as a global hub for digital assets. Christopher Hui, the secretary for financial services and the treasury, has described the licensing regimes as essential to strengthening the city’s legal framework. Since launching its crypto trading-platform regime in June 2023, Hong Kong has steadily expanded regulatory oversight of the sector.
The consultation period closes on January 23rd, with legislation expected to reach the Legislative Council in 2026. No transitional arrangements have yet been announced. Unless a grace period is introduced, managers would be forced either to obtain licences before the rules take effect or exit crypto-related activity altogether.
The HKSFPA is urging regulators to reinstate the threshold exemption and provide transitional relief. The dispute highlights a familiar dilemma for financial centres courting innovation: how to regulate emerging technologies without extinguishing tentative participation before it begins.
