Introduction of New Legislation in Hong Kong
Hong Kong is on track to introduce new legislation aimed at establishing licensing frameworks for four key areas in the virtual asset sector: dealing, custody, advisory, and management services. Secretary for Financial Services and the Treasury, Christopher Hui, provided insights during a policy briefing on October 5, outlining that an amendment bill will be proposed this year, which must navigate the legislative process before becoming law.
Consultations and Licensing Framework
This move is the result of extensive consultations conducted by both the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC). The upcoming legislation will broaden the scope of licensing requirements, currently limited to virtual asset trading platforms and stablecoin issuers, to incorporate additional service providers in the cryptocurrency ecosystem.
Preparations for this legislation have been ongoing, with regulators spending over a year crafting guidelines for each of the new license categories. The bill aims to enhance protections in areas such as virtual asset dealing, for which a regulatory structure will be modeled on existing Type 1 securities dealing rules. The SFC is set to take on the responsibility of licensing and overseeing firms involved in these transactions, with possible exemptions being discussed, similar to standard practices in traditional securities markets.
Custody, Advisory, and Management Services
For custody services, regulations will outline how firms can securely maintain clients’ private keys, along with risk management measures related to the safeguarding of virtual assets held in Hong Kong. The December 2025 consultation outcomes indicated a strong focus on protecting client assets through stringent controls.
Advisory and management services will fall under distinct licensing regimes, following advisory guidelines akin to Type 4 securities regulations and adopting Type 9 asset management standards for virtual assets. This approach emphasizes a principle of uniformity in risk management across similar business activities. During the consultation process, there was notable support for these proposed licensing measures. Notably, a timeline for these new regulations is aligned with those for dealing and custody services, streamlining the regulatory framework.
Public Consultation and Engagement
The FSTB and SFC sought public input on dealing and custody licenses starting in June 2025, receiving over 190 responses before concluding their findings in December. A subsequent consultation for advisory and management services closed in January 2026 and drew 51 participants from various sectors, leading to finalized proposals that are expected to comply with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
The authorities have urged both existing and potential service providers in the advisory and management space to engage with the SFC in advance of the new laws. This proactive approach is intended to help these firms prepare for forthcoming licensing requirements.
Refining Existing Frameworks and Future Plans
In addition to the impending legislation, Hong Kong is also refining its existing licensing frameworks. Current regulations for virtual asset trading platforms mandate that local exchanges obtain SFC approval, which includes stringent stipulations around investor protection, governance, and anti-money laundering practices. The SFC enhanced its custody standards for licensed entities in August 2025, focusing on cold wallet security and cybersecurity measures. Meanwhile, a separate regulatory framework governs stablecoin issuance, requiring licenses from the Hong Kong Monetary Authority for any fiat-linked stablecoin operations.
Looking forward, Hong Kong’s 2026 Policy Address envisages a comprehensive suite of regulations for trading stablecoins and tokenized assets, alongside the establishment of a digital infrastructure for 24/7 settlement operations. The SFC is planning to roll out a surveillance system specifically for digital asset custody by late 2026, with more extensive anti-money laundering and big-data considerations to be integrated by 2027. Furthermore, the Hong Kong Monetary Authority is planning to implement a central bank digital currency system, set to enhance financial operations by the end of 2026.
Conclusion
Although the specific timing for the introduction of these new licenses remains unannounced, Hui’s remarks reflect a commitment to advancing Hong Kong’s regulatory landscape for virtual assets, with an eye on sustaining its competitive edge within the global cryptocurrency market.
