Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) have released consultation conclusions, signaling a move towards formalizing licensing regimes for virtual asset advisory and management service providers. These new rules will operate under the existing Anti-Money Laundering and Counter-Terrorist Financing Ordinance, aligning virtual asset services with traditional financial regulations under the principle of “same business, same risks, same rules.”
Key Takeaways
- Hong Kong’s FSTB and SFC will finalize legislative proposals for virtual asset advisory and management service provider licensing.
- The proposed regulatory framework aligns virtual asset activities with existing regulations for securities advisory and discretionary asset management.
- New rules will include baseline financial resource requirements, with varying capital needs depending on whether client assets are held.
- Dually licensed entities will not face redundant capital requirements, adhering to the highest applicable floor.
- The legislative bill is slated for introduction to the Legislative Council in 2026, following market consultations.
The market has shown considerable support for the proposed regimes, with stakeholders agreeing with the general policy direction. The SFC stated that the framework will broaden the scope of virtual asset advisory services to include recommendations on the acquisition or disposal of virtual assets, while management rules will govern firms with discretionary control over virtual asset portfolios. This move aims to foster a more secure and expansive digital asset market in Hong Kong.
Financial resource requirements have been established, mandating a minimum liquid capital of HKD 100,000 (approximately $12,760) for firms that do not hold client assets. For entities managing client assets, the requirements increase significantly, calling for HKD 5 million (approximately $638,095) in paid-up capital and HKD 3 million (approximately $328,862) in liquid capital. A provision has also been made for dually licensed entities, ensuring they will not be subject to cumulative regulatory capital requirements but rather the highest capital floor among their authorized activities.
Regulators have indicated that this comprehensive framework, in conjunction with parallel proposals for virtual asset dealing and custody services, is designed to enhance investor protection and encourage responsible innovation. SFC CEO Julia Leung emphasized that the conclusion of this consultation phase marks a significant step in completing the digital asset regulatory landscape, enabling the long-term growth of the ecosystem.
The FSTB and SFC intend to present the relevant bill to the Legislative Council in 2026. Current and prospective virtual asset advisory and management service providers are advised to proactively engage with the SFC for early discussions regarding pre-application procedures.
Potential Regulatory Precedent
The regulatory approach adopted by Hong Kong in establishing licensing regimes for virtual asset advisory and management services could serve as a significant precedent for other jurisdictions. By drawing parallels with existing frameworks for traditional financial services, such as securities advisory and asset management, Hong Kong is demonstrating a pragmatic method for integrating digital assets into established regulatory structures. This “same business, same risks, same rules” philosophy aims to ensure a consistent level of oversight, investor protection, and market integrity, regardless of the underlying asset class. The clear definition of advisory and management functions within the virtual asset space, coupled with specific capital requirements, offers a blueprint for countries seeking to develop their own comprehensive digital asset regulations. The timeline for introducing the legislative bill, set for 2026, allows for a considered and phased implementation, providing the industry with adequate time to adapt. This measured approach, focused on balancing innovation with risk mitigation, may influence global regulatory trends as more nations grapple with the complexities of supervising the burgeoning digital asset market.
Information compiled from materials : www.theblock.co