Hong Kong's new crypto asset management regulations face industry resistance, association warns "all-or-nothing" licensing requirements may stifle innovation

BlockBeats News, January 20 — Hong Kong securities industry groups have raised objections to the city’s proposed regulatory framework for digital asset management, warning that the related reforms could hinder traditional asset management institutions from entering the cryptocurrency sector.

The Hong Kong Securities and Futures Professionals Association, in a submission to regulators on Tuesday, opposed a proposed regulatory adjustment that would remove the existing “minimum exemption threshold” for Type 9 asset managers. According to a report by local law firm JunHe, under the current framework, institutions holding a Type 9 license (covering discretionary portfolio and asset management business) that allocate less than 10% of their fund’s total assets to crypto assets only need to report to regulators and do not need to apply for an additional license upgrade.

The Hong Kong Securities and Futures Professionals Association pointed out that the proposed reform would eliminate this threshold, meaning that even a 1% bitcoin exposure would require obtaining a full virtual asset management license. The industry group stated that this “all-or-nothing” regulatory approach lacks the principle of proportionality, arguing that imposing significant compliance costs even when risk exposure is limited could deter traditional management institutions from exploring the crypto asset class.

This industry backlash targets a regulatory framework that is already moving at full speed. In December last year, after launching a public consultation in June, Hong Kong authorities released a consultation summary report on the proposed reforms. The Financial Services and the Treasury Bureau and the Securities and Futures Commission of Hong Kong have launched further consultations on introducing a supplementary licensing regime for crypto asset trading, advisory, and management services.