Hong Kong Treasury Department and Securities and Futures Commission: Virtual asset trading and custody services are expected to be included in the regulatory framework.

On December 24, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) jointly issued a consultation summary on the legislative proposal to establish a licensing regime for virtual asset trading and custody service providers. The FSTB and SFC also announced today that they will further conduct public consultation for a period of one month on the licensing regime for providers of advisory services on virtual assets and providers of virtual asset management services. A two-month public consultation was completed in August this year, during which 101 submissions and 93 submissions were received on the proposed licensing regime for virtual asset trading service providers and virtual asset custody service providers, respectively, from market participants, industry organizations, chambers of commerce, and professional bodies. The majority of respondents expressed clear support for expanding the regulatory scope to include virtual asset trading and custody services after the licensing regime for virtual asset trading platforms is implemented in June 2023. They believe this is a key step in promoting the stable and sustainable development of the digital asset ecosystem in Hong Kong. In addition, respondents generally support the proposed regulatory requirements and implementation arrangements, while also offering optimization suggestions in some areas and seeking clarification. The proposed licensing regime for virtual asset trading service providers will be broadly consistent with the regime applicable to Type 1 (securities trading) regulated activities under the Securities and Futures Ordinance (Chapter 571) for traditional securities trading activities. As for virtual asset custody service providers, the proposed licensing regime will focus on managing risks related to the storage of client virtual asset private keys in Hong Kong to address core risks in virtual asset custody and enhance the security of client assets. Christopher Hui, Secretary for Financial Services and the Treasury of Hong Kong, said, "Proposing to establish a licensing regime for virtual asset trading and custody service providers is an important step in enhancing the digital asset legal framework. The proposed licensing regime strikes a balance between promoting market development, managing risks, and protecting investors prudently, helping us achieve our vision of building a trustworthy and sustainable digital asset ecosystem, thereby establishing Hong Kong as a global center for digital asset innovation." Ashley Alder, Chief Executive Officer of the Securities and Futures Commission of Hong Kong, said, "We have made significant progress in establishing a regulatory framework for virtual assets and ensure Hong Kong continues to lead in the global digital asset market through building a trusted, competitive, and sustainable ecosystem. We remain firmly committed to responsible innovation, laying the foundation for a vibrant and resilient ecosystem that will benefit Hong Kong's financial markets and overall economy in the long run." In response to feedback received from the consultation, the FSTB and SFC today further launched public consultation on the licensing regime for providers of advisory services on virtual assets and providers of virtual asset management services. The original proposal was to include relevant virtual asset activities under the licensing regime for virtual asset trading service providers. The revised regulatory framework will differ from the original proposal and be based on the regulatory regime for similar services in the traditional securities market, clarifying the scope of regulated activities under different virtual asset licensing regimes for market participants. Further consultation will last for one month, until January 23, 2026.