Hong Kong securities industry group has raised concerns over the city’s proposed rules for managing digital assets, warning that these could discourage traditional asset managers from exploring crypto.
In a submission to regulators on Tuesday, the Hong Kong Securities and Futures Professionals Association (HKSFPA) specifically opposed plans to remove the existing “de minimis” threshold for Type 9 licensed managers.
The threshold currently lets managers hold small amounts of digital assets without facing full regulatory requirements. Removing it could increase compliance costs and make crypto investment less attractive for established firms.
The business group’s concerns centre on a regulatory framework that has already gained traction. Hong Kong officials presented consultation conclusions on the plans in December, following a public consultation that began in June.
Since then, the Financial Services and Treasury Bureau, as well as the Securities and Futures Commission, have held additional consultations on establishing new licensing regimes for crypto asset trading, consulting, and management services.
The move underscores the challenge regulators face in balancing innovation in digital assets with ensuring proper oversight in Hong Kong’s financial markets.
HKSFPA flags concerns over proposed SFC-only custody rule for crypto managers
The Hong Kong Securities and Futures Professionals Association (HKSFPA) has voiced concerns over proposed rules that would force virtual asset managers to hold all assets only with SFC-licensed custodians.
The group said this could be a big problem for private equity and venture capital funds investing in early-stage tokens, many of which local custodians don’t yet support.
Such a strict rule could make it nearly impossible for Hong Kong-based managers to run Web3-focused VC funds.
At the same time, the association welcomed the government’s idea of allowing self-custody or the use of qualified offshore custodians for professional investors.
The approach could give fund managers the flexibility they need while still keeping oversight, showing a more practical path for supporting innovation in the city’s growing crypto and blockchain space.
Hong Kong boosts crypto regulations to strengthen digital asset market
Interestingly, the industry opposition comes at a time when Hong Kong has been steadily stepping up its crypto game by expanding and clarifying regulations for digital assets.
The government is currently consulting on the licensing frameworks of virtual assets dealing, advising, and management services via the Financial Services and Treasury Bureau and the SFC.
The objective is to have guidelines for companies, but also to promote responsible innovation.
But on the other hand, trade bodies like the HKSFPA are providing feedback on these regulations to ensure that they can be realistically complied with. A lack of realistic regulations could stifle not only investments but a whole economy.
This is reflective of the efforts of Hong Kong to achieve a balance between protecting, as well as promoting, the growth of its markets while being able to position the territory as the next cryptocurrency hub in the region.