This article was first published on TurkishNY Radio.
Hong Kong is preparing a major expansion of Crypto regulation as it works to formalize oversight of digital asset services. Regulators said the city plans to complete proposals for licensing virtual asset dealers and custodians and submit them to lawmakers in 2026.
The announcement reflects Hong Kong’s effort to strengthen Crypto regulation while preserving its role as a global financial center. Officials say clearer rules are needed as digital assets become more embedded in mainstream finance.
New Crypto Licensing Framework
A two-month public consultation shaped the proposals. Industry participants and stakeholders submitted more than 190 responses. Regulators said the feedback showed broad support for a licensing regime.
Under the plan, Crypto regulation for dealers and custodians will sit under existing anti-money laundering and counter-terrorist financing laws. The structure mirrors rules already applied to securities firms.
Also Read: HashKey’s Hong Kong Crypto IPO Plan, Explained
The proposed framework introduces mandatory licenses for firms offering virtual asset dealing and custody. Dealers would be regulated in a way similar to securities intermediaries. Custodians would face strict standards for protecting client assets.
Crypto regulation would focus on private key security, internal controls, and clear accountability. Officials said this approach reduces risk without blocking innovation.
Building on Existing Crypto Rules
Hong Kong has already taken several steps to expand Crypto regulation. Earlier in 2025, the city brought its Stablecoin Ordinance into force. That law created a licensing regime for stablecoin issuers.
Crypto trading platforms are also required to operate under a mandatory licensing system. This replaced an earlier opt-in model introduced in 2020.
Licensed Platforms and Market Access
So far, 11 crypto trading platforms have received regulatory approval. Authorities say consistent Crypto regulation has helped improve market standards.
Licensed firms gain clearer access to banking and institutional partners. Unlicensed operators, meanwhile, face tighter restrictions. Regulators argue this balance supports growth while protecting investors.
Regional Competition and Policy Direction
Hong Kong has long aimed to become Asia’s leading digital asset hub. Its approach to Crypto regulation is more open than that of mainland China. China has intensified its restrictions on virtual currencies.
Hong Kong, by contrast, is seeking to attract global firms through predictable rules. Officials believe regulatory clarity can be a competitive advantage over regional rivals.
Expanding Oversight Beyond Spot Trading
Crypto regulation in Hong Kong is not limited to exchanges. Earlier this year, regulators announced licensing plans for over-the-counter crypto trading. They also began reviewing derivatives and margin trading involving virtual assets.
In April, staking services were approved for licensed exchanges and funds. These approvals came with strict asset control and disclosure requirements.
Focus on Custody and Client Protection
The proposed custodian regime places asset safety at its core. Firms would need strong systems to secure private keys. Client assets must be properly segregated. Operational risks would need ongoing monitoring.
Regulators say these measures are essential as institutional interest in digital assets grows. Strong Crypto regulation in custody is seen as critical for trust.
Advisers, Managers, and Same-Risk Rules
Regulators have also launched a consultation on virtual asset advisers and managers. The plan applies the principle of “same business, same risks, same rules.” Advisory and management services involving digital assets would follow standards similar to traditional finance.
This ensures Crypto regulation is consistent across comparable activities. Public comments on the proposal are due by Jan. 23.
Tokenization and Long-Term Strategy
Beyond trading and custody, Hong Kong is testing tokenization projects. These initiatives involve putting traditional assets on blockchain networks. Regulators said upcoming licensing regimes are part of a broader digital asset framework.
This includes stablecoins and tokenized products. Officials believe integrated Crypto regulation will help manage future growth.
Conclusion
Hong Kong’s most recent action reflects an incremental and orderly approach to regulating Crypto. The initiative, which integrates oversight of digital assets into already established finance laws in the city, is meant to help foster innovation and reduce risk.
The 2026 roll-out is a long-term commitment rather than a short-term response. With growing international attention on cryptocurrencies, Hong Kong is looking to emerge as a well-regulated and trustworthy market.
Also Read: Hong Kong Launches Global Crypto Tax Framework
Appendix: Glossary of Key Terms
Crypto regulation: Laws and regulations that regulate the use, trading and custody of digital assets.
Virtual asset service provider: A company that enables transactions in cryptocurrencies.
Crypto custodian: A company that protects digital assets and the private keys to them for clients.
Anti-Money Laundering (AML): Rules and regulations to prevent illegal financial transactions and funds.
Counter-Terrorist Financing (CTF): Regulations intended to prevent financial support efforts for terrorist activity.
Stablecoin: Typically a cryptocurrency that is designed to maintain a steady price, frequently pegged to fiat currency.
Tokenization: The practice of turning real-world assets, like real estate or stocks, into digital things on a blockchain.
Regulation regime: A system in which companies must be authorized before they can function.
Frequently Asked Questions Hong Kong Crypto Regulation
1- What is Hong Kong proposing?
Hong Kong plans to introduce licensing for virtual asset dealers and custodians under expanded Crypto regulation.
2- When will the rules take effect?
Regulators aim to submit the proposals to lawmakers in 2026.
3- Who will need a license?
Firms offering crypto dealing or custody services would require approval under the new Crypto Regulation Framework.
4- Are crypto platforms already regulated?
Yes. Crypto trading platforms already operate under mandatory licensing rules.
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