Hong Kong financial industry opposes stricter cryptocurrency regulation proposals

Source: CritpoTendencia Original Title: Hong Kong Financial Industry Opposes Stricter Crypto Regulations Original Link: Hong Kong’s main financial regulators have expressed firm opposition to recent regulatory proposals aimed at tightening license requirements for asset managers holding cryptocurrency exposure.

Specifically, the city’s regulators are proposing to eliminate certain existing exemptions and strengthen controls over crypto asset management.

The financial sector warns that such measures could hinder innovation and weaken Hong Kong’s position as one of Asia’s leading financial and crypto hubs.

Regulatory Proposals Put Industry on Alert

In this context, the Hong Kong Securities and Futures Professionals Association (HKSFPA) has voiced criticism to regulators, warning that removing the “de minimis” threshold for Class 9 licenses could prevent traditional asset managers from participating in the crypto market. The association reflected this stance in its official response document.

Currently, companies operating under a Class 9 license can allocate less than 10% of their total fund assets to cryptocurrencies without additional authorization, simply by notifying regulators in advance.

However, the proposed changes introduce substantial shifts, as even marginal exposures—such as Bitcoin accounting for 1%—would require full virtual asset management licenses.

HKSFPA considers this binary approach disproportionate, as it significantly increases compliance costs and limits the room for managers to experiment. In their view, this could restrict access to crypto assets for entities from traditional financial sectors or those with more conservative risk appetites.

Custody Flexibility Becomes a Friction Point

Adding to these objections is the industry’s rejection of the proposal requiring asset managers to keep assets exclusively with entities authorized by the Hong Kong Securities and Futures Commission.

From this perspective, private equity and venture capital funds investing in tokens during early stages will face greater difficulties, as many local custodians are not yet equipped to support such emerging assets.

In this regard, HKSFPA warns that enforcing this requirement could hinder the development of Web3-focused venture funds and weaken Hong Kong’s competitiveness relative to other financial centers with more flexible regulatory frameworks.

Given this situation, the association recommends allowing self-custody or the use of qualified international custodians, at least for professional investors. According to their proposal, this alternative would offer greater operational flexibility without compromising fund protection or regulatory standards.

Hong Kong Faces Key Decision

In this context, the regulatory debate runs parallel to authorities’ efforts to consolidate Hong Kong as a global reference in the digital asset ecosystem.

Over the past few months, the city has made progress in implementing licensing frameworks for virtual asset trading platforms and stablecoin issuers, clearly demonstrating its commitment to regulating the sector.

However, industry representatives insist that this approach must maintain an appropriate balance so that investor protection does not ultimately restrict innovation or create barriers for traditional asset managers entering the market.

Under this premise, the outcome of current consultations and dialogues between regulators and market participants will be decisive in Hong Kong’s positioning as an Asian crypto hub.