Hong Kong Securities Industry Groups Oppose Tightening of Crypto Asset Management Licensing Rules

Odaily News Hong Kong's securities industry group, the Hong Kong Securities and Futures Professionals Association (HKSFPA), has submitted feedback to regulators regarding Hong Kong's proposed digital asset management regulatory framework, opposing several tightening measures.

The HKSFPA primarily opposes the proposed elimination of the current "de minimis" arrangement. Under the existing rules, institutions holding a Type 9 (asset management) license can allocate up to 10% of a fund's total assets to crypto assets after notifying the regulator, without needing to apply for an additional virtual asset management license. The proposed plan intends to abolish this threshold, meaning that even a 1% allocation to Bitcoin would require obtaining a full virtual asset management license.

The HKSFPA pointed out that this "all-or-nothing" regulatory approach is disproportionate. It could impose significant compliance costs even for limited risk exposure, potentially deterring traditional asset managers from exploring the crypto asset space.

Furthermore, the HKSFPA also raised objections to the proposed custody requirements. The relevant proposal mandates that virtual asset managers can only use Securities and Futures Commission (SFC)-licensed custodians for asset safekeeping. The association stated this requirement is unrealistic for early-stage token investments and Web3 venture capital, potentially restricting local Hong Kong institutions from engaging in such business.

Simultaneously, the HKSFPA expressed support for the direction allowing self-custody and the use of qualified overseas custodians when serving professional investors.

The report indicates that the aforementioned regulatory proposals have entered the implementation phase. Hong Kong authorities have previously released a consultation summary on the related plan and have initiated a new round of consultation on the licensing regime for crypto asset trading, advisory, and management services. (The Block)