Hong Kong Lays Out Plans to Expand Licensing for Virtual Asset Services

The consultation outcomes, published on December 24, outline how authorities plan to extend regulation beyond trading platforms, reinforcing the city’s push to develop a more comprehensive and structured framework for the crypto sector.

The consultation was conducted jointly by the Financial Services and the Treasury Bureau and the Securities and Futures Commission and attracted strong engagement from across the virtual asset industry. More than 100 submissions were received on the proposed licensing regime for virtual asset dealing services, while close to the same number of responses were submitted on the proposed custodian framework. Most respondents expressed support for bringing these activities under formal regulation, while also calling for greater clarity on how certain operational requirements would be applied in practice.

At the heart of the proposals is an effort to treat virtual asset activities more like traditional financial services, rather than as a standalone or experimental sector. Under the proposed approach, licensing requirements for virtual asset dealing services would broadly align with existing rules governing securities dealing. For custodial services, regulators are placing particular emphasis on the protection of client assets, including how private keys are stored, controlled, and safeguarded.

Authorities said the proposed regimes are intended to strengthen investor protection without undermining market development, a balance that has become a recurring theme in Hong Kong’s digital asset policy. By expanding the regulatory perimeter, officials aim to reduce gaps in oversight while providing clearer expectations for firms operating in the space.

Christopher Hui, Secretary for Financial Services and the Treasury, emphasized that the proposals are designed to strike a prudent balance between encouraging innovation, managing financial risks, and protecting investors. He added that the consultation conclusions reflect Hong Kong’s long-term commitment to building a sustainable digital asset ecosystem and reinforcing its role as an international financial center.

Alongside the consultation conclusions, the government also launched a separate public consultation on a proposed licensing regime for virtual asset advisory and management services, signaling that regulatory expansion may not stop with dealing and custody alone. This additional consultation suggests regulators are considering a more holistic approach to digital asset oversight, potentially covering a wider range of services offered to investors. The consultation on advisory and management services will remain open until January 23, 2026.

Industry feedback summarized in the consultation outcomes indicates broad acceptance of clearer regulatory boundaries, particularly as digital assets continue to intersect with mainstream finance. At the same time, respondents highlighted the need for clear implementation guidance and practical transitional arrangements, especially for firms already operating in the market. The government acknowledged these concerns and said they would be considered as the proposals move toward legislation.

Hong Kong’s regulatory approach to virtual assets has evolved gradually, with authorities emphasizing consultation and phased implementation rather than abrupt rule changes. By progressively extending licensing requirements across different segments of the digital asset industry, regulators appear focused on embedding crypto activity within familiar regulatory structures, rather than creating an entirely separate system.

The government plans to finalize the proposed licensing frameworks and introduce the necessary legislation to the Legislative Council in 2026. If enacted, the changes would significantly expand Hong Kong’s oversight of the digital asset sector, bringing dealing, custody, and potentially advisory and management services under formal supervision.

The consultation conclusions offer clearer signals about the regulatory direction of travel, even as detailed requirements are still being refined. The development underscores a broader strategy to position the city as a jurisdiction where digital asset innovation can develop within a defined, transparent, and supervised environment.