Hong Kong closes the circle on crypto regulation: the new framework for dealers and custodians

For nearly a year, Hong Kong’s crypto ecosystem has operated in an irregular situation. While retail trading platforms operated under supervision, asset custodians and institutional dealmakers continued to operate in a regulatory vacuum. This situation changed on the eve of Christmas 2025, when the Financial Services and the Treasury Bureau (FSTB) and the SFC concluded consultations on a completely new licensing system.

The end of the unregulated era for crypto operators

Hong Kong has finally completed its regulatory framework by introducing specific requirements for virtual asset dealers and custodians. This step marks the culmination of a well-planned strategy: “same business, same risks, same rules” is no longer just a motto but an operational reality.

The new licenses follow the structure of Type 1 securities licenses, meaning crypto dealers will be subject to the same rigorous standards as traditional finance. For custodians, the requirements are even more stringent: they must demonstrate the ability to securely manage private keys, a fundamental element in protecting investors’ funds. This transformation is not just a regulatory addition but the completion of the SFC’s ASPIRe roadmap, which turns the Hong Kong crypto market into an ecosystem built on transparency and institutional trust.

A framework built on institutional trust

Hong Kong’s approach differs from that of many jurisdictions: instead of imposing final rules without consultation, the SFC encourages companies to engage in “pre-application discussions” with regulators. This approach not only better prepares initial applicants but also reduces surprises and accelerates market adaptation.

At the same time, further regulations are in development. The next phase will include virtual asset advisors and managers, extending the same high standards to all market participants. This keeps the Hong Kong crypto environment interconnected, balanced, and transparent in all its components.

SFC CEO Julia Leung stated that “the significant progress in the virtual asset regulatory framework ensures that Hong Kong remains at the forefront of digital asset market development, fostering a reliable, competitive, and sustainable ecosystem.” Financial Services and the Treasury Secretary Christopher Hui added that “the proposed licensing regimes strike a prudent balance between market development, risk management, and investor protection.”

The global push toward tighter regulation

Hong Kong’s regulatory moves reflect a worldwide trend. In Europe, Spain is fully implementing the MiCA framework, with a deadline of July 1, 2026. Russia, for its part, has adopted a pragmatic approach by limiting private investments. These parallel developments indicate that 2026 marks a definitive turning point: the era of the crypto “wild west” is over.

What it means for the crypto market in 2026

Hong Kong’s new course represents a paradigm shift in sector oversight. While many countries are still defining regulatory details, Hong Kong has completed a structure that governs the entire “invisible infrastructure” of cryptocurrencies: not only consumer-facing platforms but also asset custody and transaction execution. This comprehensive approach transforms the crypto market from a gray zone into a highly supervised sector where only compliant companies will survive and thrive. With this move, Hong Kong solidifies its position as a leader in responsible regulation of the digital sector.