Hong Kong Crypto Licensing Expands: Dealers and Custodians Face Strict New Mandate

Hong Kong is moving ahead with a major expansion of its crypto regulatory framework after regulators concluded consultations on new licensing regimes for virtual asset dealers and custodians, tightening oversight across a wider part of the digital asset market.

The Financial Services and the Treasury Bureau and the Securities and Futures Commission said on Dec. 24 that firms providing virtual asset dealing or custody services in Hong Kong will be required to obtain licenses once the new framework takes effect.

New Licensing Plan Brings Crypto Brokers and Custodians Into Oversight

The move follows months of consultation and comes as authorities seek to close regulatory gaps that emerged as crypto activity spread beyond licensed exchanges into over-the-counter trading, brokerage services, and third-party custody.

Regulators said the proposals received broad market support and will now move into the legislative phase, marking another step in building a comprehensive digital asset regime under the SFC’s ASPIRe roadmap.

According to the SFC release, all virtual asset dealers will be regulated in a way that closely mirrors existing rules for securities dealers.

Notably, the licensing requirement will cover a wide range of activities, including virtual asset-to-fiat and virtual asset-to-virtual asset conversions, brokerage services, block trading, and related advisory functions, whether conducted online or through physical outlets.

This brings OTC trading and broker-style services squarely within regulatory oversight for the first time.

Also, under the planned framework, custodians will also face a dedicated licensing regime focused on the safekeeping of client assets. Any entity holding or controlling private keys for client virtual assets in Hong Kong will need to be licensed or registered.

Regulators said the regime is designed to address risks around asset protection by requiring strict segregation of client assets, strong internal controls over key management, enhanced cybersecurity standards, and robust business continuity planning.

Dealers will be required to place client assets only with licensed or registered custodians operating in Hong Kong.

Both regimes will impose fit-and-proper requirements on applicants, alongside minimum financial resource thresholds.

Dealers are expected to meet capital requirements of around HK$5 million, while custodians will face higher thresholds, including HK$10 million in paid-up capital.

Hong Kong’s Crypto Framework Grows to Include Advisers and Managers

Alongside the dealer and custodian regimes, regulators launched a further consultation on extending licensing requirements to virtual asset advisory and management service providers.

The proposals would bring crypto advisers and asset managers under a similar regulatory structure to their traditional finance counterparts, giving the SFC powers to supervise, inspect, and sanction firms operating in this part of the market.

SFC Chief Executive Officer Julia Leung said the expanded framework is intended to support a secure and competitive digital asset ecosystem while maintaining strong investor protection.

Regulators are encouraging firms interested in the new regimes to engage early with the SFC through pre-application discussions to better prepare for compliance.

The latest step builds on a series of regulatory developments over the past year. Hong Kong already requires crypto trading platforms to be licensed, with 11 exchanges approved so far under a mandatory regime that replaced an earlier opt-in framework.

Earlier in 2025, the city brought its Stablecoin Ordinance into force, creating a licensing regime for stablecoin issuers.

Authorities have also taken steps to expand market access, including allowing licensed exchanges to connect to global liquidity pools and easing certain token listing requirements.

The proposal, still subject to consultation, reflects a cautious approach that distinguishes between regulated stablecoins and more volatile crypto assets.

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