Hong Kong's Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) have launched a joint public consultation on legislative proposals to introduce licensing regimes for digital asset dealing and custodian service providers in Hong Kong, building on earlier work on over-the-counter digital asset services. Under the proposed framework, anyone carrying on a business in Hong Kong providing digital asset dealing services or digital asset custodian services would need to be licensed by or registered with the SFC. Dealing services would be in scope regardless of delivery channel and would cover both simple conversions between digital assets and/or fiat and more complex activities such as brokerage, block trading, and other activities of advisors or asset managers. Custody services would be defined as the safekeeping of clients’ digital assets, or instruments enabling transfer of clients’ digital assets (including private keys). Licensed or registered firms would need to meet fit-and-proper criteria and comply with requirements covering areas including financial resources, competence, risk management, financial reporting and disclosure, conduct of business, information and notifications, record keeping, and client asset protection, with investor protection safeguards explicitly included for dealing. The SFC would act as standard setter for regulatory requirements, while the Hong Kong Monetary Authority would be the frontline regulator for banks and stored value facilities registered to provide the relevant services; both authorities would have statutory powers to implement the regimes. The consultation closes on 29 August 2025, and the FSTB and SFC plan to meet relevant sectors during the consultation period. The papers use the legally defined term “virtual asset” under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, while the Government will consider whether a different term should be adopted in future legislation.

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