Hong Kong tightens digital asset regulation, securities organizations voice opposition

In recent years, Hong Kong – a leading international financial center – has been promoting the enhancement of regulatory frameworks for digital asset products. However, this move has faced resistance from local securities organizations, who are concerned that the new regulations may be too strict and could hinder the industry’s development.

HKSFPA Raises Key Concerns

The Hong Kong Securities and Futures Association (HKSFPA) has officially expressed opposition to the new regulatory framework. According to Odaily 星球日报, the organization believes that the requirements in the new proposal are not aligned with the operational realities of traditional asset management companies that intend to enter the digital asset space.

HKSFPA’s main concern is a fundamental shift in the approach to regulation. Instead of maintaining flexibility, the new rules are considered too rigid and unsuitable for organizations wishing to operate on a smaller scale.

Bitcoin Issues and Complex Licensing Requirements

Under current standards, organizations with a Type 9 license are permitted – after reporting – to invest no more than 10% of their fund assets in digital assets without needing additional virtual asset management licenses. This mechanism provides a suitable level of flexibility, allowing companies to gradually explore new markets.

However, the new proposal requires that even if organizations want to allocate only 1% to Bitcoin or any other digital asset, they must hold a full license. This is seen as a “all-or-nothing” management system, creating a high barrier for traditional companies to enter the market. Instead of encouraging participation, this new standard could increase compliance costs and limit business opportunities.

Disputes Over Asset Trust Requirements

Another issue opposed by HKSFPA concerns provisions related to digital asset trusts. The association argues that the requirement to only use licensed trust organizations from the Securities and Futures Commission is unrealistic and could impose unnecessary restrictions on local asset managers.

Instead, HKSFPA advocates for a more flexible approach, allowing companies to utilize trust services from foreign organizations or to self-trust. This perspective reflects the industry’s need for a balance between regulatory compliance and operational efficiency.

Impact on the Future of Asset Management in Hong Kong

This debate not only affects HKSFPA but also significantly impacts Hong Kong’s position in the global digital asset management industry. If regulations become too stringent, companies may choose to operate in other financial jurisdictions with more friendly regulatory environments, thereby reducing competition and innovation in Hong Kong.

Stakeholders are awaiting the final decision from regulators on whether Hong Kong will adjust these standards to better balance investor protection with economic development.