Hong Kong Advances Crypto Trading and Custody Licensing Plans

Source: CryptoNewsNet Original Title: Hong Kong Advances Crypto Trading and Custody Licensing Plans Original Link: Hong Kong is taking another step toward tighter crypto oversight. On December 24, the Financial Services and the Treasury Bureau and the Securities and Futures Commission jointly released a consultation summary. This outlines plans to advance licensing rules for virtual asset trading and custody service providers. The move aims to strengthen regulation while supporting the long-term development of Hong Kong’s digital asset market. Authorities said the framework will focus on market integrity, investor protection and operational resilience.

Licensing Regime for Trading and Custody Providers

Under the proposal, providers offering virtual asset trading services will fall under a licensing regime similar to traditional securities dealing. The structure closely mirrors Type 1 regulated activities under Hong Kong’s Securities and Futures Ordinance. For custody service providers, the focus will be narrower but stricter.

Regulators plan to target risks linked to holding client assets, especially the control and safekeeping of private keys. The goal is to reduce custody-related failures and enhance client asset security. The consultation summary noted strong industry backing. Most respondents supported expanding regulation to include trading and custody, following the launch of the virtual asset trading platform licensing regime in June 2023.

Market Feedback Shapes Policy Direction

The initial consultation period closed in August 2025. Regulators received more than 190 submissions from market participants, industry groups, chambers of commerce and professional bodies. Feedback broadly endorsed the direction of the proposals. However, respondents also asked for clearer definitions and more tailored requirements for different types of virtual asset services. In response, authorities refined the framework to better distinguish between trading, custody, management and advisory roles. This separation aims to reduce confusion and ensure that firms face rules aligned with their actual activities.

New Consultation on Advisory and Asset Management Services

Alongside the consultation summary, Hong Kong launched a new one-month public consultation. This phase focuses on licensing regimes for virtual asset advisory services and virtual asset management providers. Originally, these services were expected to fall under the trading service framework. Regulators have now shifted course. Instead, they plan to regulate them under systems similar to those used in traditional securities markets. This change is meant to clearly define which activities fall under which license. The new consultation period will run until January 23, 2026 and regulators have invited public feedback.

Legislative Path and Global Positioning

Officials said the proposed licensing regimes aim to balance innovation with risk management. They also emphasized Hong Kong’s ambition to remain a global financial hub while maintaining high regulatory standards. After reviewing feedback from the latest consultation, the government plans to finalize legislative proposals. Authorities expect to submit the draft ordinance to the Legislative Council in 2026.

If approved, the framework would further solidify Hong Kong’s approach to crypto regulation. It would also align virtual asset oversight more closely with existing financial market rules. In summary, Hong Kong is signaling continuity rather than a policy shift. Regulation will expand, expectations will rise and firms will need clearer compliance strategies as the city moves toward a more structured digital asset regime.