Hong Kong Crypto Licensing Plans May Hinder Digital Asset Managers

Industry Concerns Over Hong Kong's Crypto Licensing

Hong Kong's digital asset management sector is facing potential upheaval as industry leaders express concerns over new crypto licensing proposals. The Hong Kong Securities and Futures Professionals Association (HKSFPA) has warned that these rules could inadvertently halt compliant operations, disrupt business continuity, and increase costs.

Potential 'Hard Start' Challenges for Managers

The HKSFPA highlighted the risk of a 'hard start' where existing managers must cease regulated crypto activities while awaiting licensing approval. This pause could affect even those companies that maintain regulatory engagement.

Elimination of 'De Minimis' Threshold

The association criticized the removal of the 'de minimis' threshold for Type 9 managers, which currently allows limited crypto allocation. The proposed changes could require full licensing for any crypto exposure, even minimal. This approach, according to HKSFPA, is disproportionate to the actual risk involved.

Broader Regulatory Expansion

These developments are part of Hong Kong's broader push to enhance digital asset oversight. Recent consultations and regulatory proposals aim to cover a wider range of crypto-related financial services. However, the HKSFPA advocates for a risk-based exemption and a transition period of 6 to 12 months to ensure compliance without disrupting investment activities.

Without transitional measures, Hong Kong risks discouraging institutional involvement in digital assets, potentially impacting its status as a competitive crypto hub.