Hong Kong Association Cautions SFC: Immediate Crypto Licensing Could Disrupt Firms

Potential Disruption from Immediate Licensing Implementation

The Hong Kong Securities & Futures Professionals Association (HKSFPA) has raised concerns that the city's proposed crypto licensing regimes might inadvertently compel compliant crypto managers to halt operations. This warning addresses the potential for a 'hard start' where existing firms must be fully licensed by the new rules' commencement or cease activities during application reviews.

The Securities and Futures Commission and the Financial Services and the Treasury Bureau are consulting on these new regimes, which expand oversight beyond current frameworks for crypto trading platforms. While supportive of increased supervision, HKSFPA cautions that without transitional arrangements, the new rules could create operational challenges and disrupt business continuity.

Recommendation for Deeming Period

The industry group recommends a 6 to 12-month grace period for current practitioners applying for licenses before the new rules take effect. They warn that without this, legitimate managers might be forced to suspend operations due to complex applications and potential backlogs. The new regimes remain in consultation without a fixed start date.

Concerns Over Rigid Timelines

Further, the association highlights that strict timelines could deter firms from participating and hinder institutional adoption of digital assets. The group supports Hong Kong's integration of digital assets but calls for flexibility to avoid disruption. Recently, HKSFPA supported the direction of Hong Kong's implementation of the OECD's Crypto Asset Reporting Framework, while cautioning against poorly calibrated requirements.

These submissions underscore a pattern in industry feedback: support for stronger oversight but with flexible execution to prevent disruption.