Hong Kong crypto managers warn proposed licensing rules could raise costs, halt activities, and require full licenses even for minimal crypto exposure.
The Hong Kong Securities & Futures Professionals Association has warned that proposed crypto licensing rules will disrupt compliant asset managers. The group said the planned rollout may unintentionally require firms to discontinue activities without proper transitional plans.
In a filing to regulators, the association outlined dangers associated with a potential “hard start.” Under this scenario, existing crypto managers would be required to have full licenses by the rule start date or to discontinue regulated activities pending application review.
The HKSFPA strongly expressed its objection to proposals that removed the current “de minimis” exemption for Type 9 licensed managers. This license includes discretionary portfolio and assets management activities throughout traditional financial markets.
Hong Kong Plans Stricter Crypto Custody
Under the existing framework, Type 9 managers are able to hold up to 10% of a fund’s gross asset value in crypto assets. This is permitted without a separate license for virtual asset firms, provided the firm notifies regulators, according to JunHe LLP.
However, the proposed changes would do away with this threshold entirely. As a result, even 1% exposure to bitcoin would require the full virtual asset management license.
The association called this shift an “all-or-nothing” approach. It suggested that such a model is out of proportion to the real risks involved and quite likely to dissuade traditional managers from testing crypto as a portfolio diversifier.
According to the HKSFPA, the cost of complying with the new framework would increase substantially. These costs may outweigh the benefits of limited crypto exposure, particularly for experienced firms.
Another major concern is in relation to custody requirements. The proposals would require virtual asset managers to only use custodians that are licensed by the Securities and Futures Commission.
The association said such a requirement is impractical for funds that invest in early stage or emerging tokens. Lots of such assets are not supported by custodians licensed locally, which creates barriers for Web3-focused venture capital funds.
Crypto Industry Pushes for 6–12 Month Rule Adjustment Period
To minimize disruption, the HKSFPA called on regulators to re-impose a risk-based de minimis exemption. It proposed a threshold below which managers should follow a notification process rather than actual licensing.
The group further demanded a grace period of 6 to 12 months before the implementation of the new rules. This transition window would give compliant firms an opportunity to adjust operations, without being forced to shut down suddenly.
These warnings come as Hong Kong continues to expand its digital asset regulatory framework. In December, the Financial Services and the Treasury Bureau and the SFC released consultation conclusions on virtual asset dealing services licensing.
Regulators have also conducted a separate public consultation on licensing regimes for virtual asset advisory and management service providers. This consultation is open until February 6, 2026.