At a Glance
- HK regulators propose new crypto licensing regimes that could force compliant managers to halt operations if no transition period.
- HKSFPA urges a 6-to-12-month grace period for firms that apply before the rules take effect.
- The consultation covers virtual-asset dealing, advisory and management services, expanding oversight beyond existing crypto-trading rules.
Why it matters: The proposed hard-start could disrupt fund-management activities and threaten business continuity for firms already operating in Hong Kong’s crypto market.
The Hong Kong Securities & Futures Professionals Association (HKSFPA) has warned that the city’s upcoming crypto licensing regimes could unintentionally compel compliant managers to cease activities unless regulators provide a transitional window. The group’s concerns focus on a potential “hard start” that would require existing firms to be fully licensed by the commencement date or to halt regulated activities while their applications are under review.
Proposed Licensing Regime
Hong Kong’s Securities and Futures Commission (SFC) and the Financial Services and Treasury Bureau (FSTB) are consulting on new regimes that would cover virtual-asset dealing, advisory and management services. These rules would extend regulatory oversight beyond the current framework that applies mainly to crypto-trading platforms.
The consultation is still in draft form and has no fixed commencement date, but the draft outlines the scope of the new licensing requirements and the agencies that will enforce them.
HKSFPA’s Warning
The association’s warning centers on the risk that a hard-start could create operational bottlenecks, disrupt fund-management activities and undermine business continuity for companies already operating in the market. In its submission, the HKSFPA stated:
- “Legitimate businesses may be forced to suspend operations while awaiting approval,” the group wrote.
- “We strongly urge the government to implement a 6 to 12-month deeming period for existing practitioners who submit their applications prior to the commencement date.”
These remarks highlight the potential for backlogs in the application process and the complexity of the licensing requirements.
Call for Deeming Period
The HKSFPA recommends a six-to-twelve-month deeming period, also known as a grace period, for practitioners who submit license applications before the rules take effect. The period would allow firms to continue their regulated activities while awaiting approval, preventing sudden shutdowns.
| Feature | Hard Start | Deeming Period |
|---|---|---|
| Licensing deadline | Immediate | 6-12 months after application |
| Operational continuity | Potential halt | Continued activity |
| Risk of backlogs | High | Mitigated |
| Impact on fund managers | Disruption | Reduced |
The table illustrates how a deeming period could alleviate the risks identified by the HKSFPA.
Wider Regulatory Context
Beyond the hard-start issue, the consultation touches on broader changes to the crypto regulatory perimeter. New requirements for advisory and management services would bring those activities under tighter scrutiny. The HKSFPA expressed support for Hong Kong’s efforts to integrate digital assets into the financial system but cautioned that rigid implementation timelines could deter compliant firms from participating and hinder institutional adoption.
On Monday, the same industry group backed the direction of Hong Kong’s planned implementation of the OECD’s Crypto Asset Reporting Framework (CARF). However, it warned that poorly calibrated requirements could expose companies to liability and operational risks.
Industry Feedback
The submissions from the HKSFPA underscore a recurring theme: support for stronger oversight in principle, coupled with calls for flexibility in execution to avoid disruption. The group’s stance reflects the broader industry’s desire to balance regulatory certainty with practical implementation.
Key Takeaways
- HK’s new crypto licensing regimes could force compliant managers to halt activities if no transition period is provided.
- The HKSFPA calls for a 6-to-12-month deeming period to maintain operational continuity.
- The consultation expands oversight to virtual-asset dealing, advisory and management services.
- Industry feedback supports tighter supervision but stresses the need for flexible implementation.
- A hard-start could create bottlenecks, disrupt fund-management activities, and threaten business continuity.
Readers are encouraged to verify information independently. {brand} is committed to independent, transparent journalism. Read our Editorial Policy https://{brand}.com/editorial-policy