Hong Kong Industry Group Opposes Tighter Crypto Licensing Rules for Asset Managers

An industry group representing securities professionals in Hong Kong has formally opposed proposed for asset managers, warning that the changes could deter traditional financial institutions from exploring digital assets. The Hong Kong Securities and Futures Professionals Association (HKSFPA) submitted detailed feedback to regulators criticizing key parts of the proposed framework, especially the removal of a “de minimis” crypto allocation threshold that currently allows asset managers limited exposure without extra licensing.

Regulators have been consulting publicly on revisions aimed at expanding the city’s digital asset oversight, including new regimes for , advisory, and management services. While the government’s broader goal is to strengthen Hong Kong’s position as a global crypto hub, the industry group argues that some of the proposed rules would impose disproportionate compliance costs and operational hurdles on traditional asset managers with minimal crypto exposure.

Hong Kong Industry Pushback Over Licensing Thresholds and Compliance Costs

Under current regulations, asset managers holding a (the designation for discretionary portfolio and asset management firms) can invest up to 10% of a fund’s gross asset value in cryptocurrencies later than notifying the Securities and Futures Commission (SFC).

However, the revised proposals under consultation would eliminate this “de minimis” carve-out, meaning that any crypto allocation, even as low as 1% of a portfolio, would trigger the need for a full virtual asset management license. In its submission to regulators, the HKSFPA described this shift as an all-or-nothing approach that could discourage traditional managers from entering the market due to increased compliance costs and licensing burdens.

Asset managers with modest crypto exposures argued that the proposed change would impose material operational and regulatory costs without a corresponding reduction in risk. For firms exploring BTC, ETH, or other established digital assets as small portions of diversified portfolios, the requirement to secure a full virtual asset management license could outweigh the strategic benefits of limited crypto exposure.

Balancing Innovation, Regulation, and Market Access

Hong Kong’s regulatory authorities, including the and the SFC, have framed the proposed licensing reforms as part of a broader effort to strengthen investor protection and bring more crypto-related activity into a clear legal framework. The consultation process on virtual asset dealing, advisory, and management services has already progressed through multiple phases, and regulators are considering both industry feedback and global best practices as they refine the rules.

Proponents of tighter licensing argue that requiring comprehensive oversight for all firms with crypto exposure, regardless of size, will assist ensure consistent compliance with anti-money laundering (AML), counter-terrorist financing (CTF), and investor protection standards. 

However, industry pushback suggests that a calibrated, risk-based approach, such as maintaining a de minimis threshold, could balance regulatory goals with market development. As consultation continues, how Hong Kong reconciles regulatory ambitions with market development goals will have significant implications for institutional participation and the broader evolution of digital-asset regulation in Asia.