Reed Smith Client Alerts

Key takeaways

  • Hong Kong authorities propose two new licensing regimes for virtual asset dealing and custody services
  • Overseen by the SFC and HKMA, regimes cover spot trading, OTC services, and VA custody, with extraterritorial application to activities targeting Hong Kong investors
  • Businesses should prepare early, assess operations for compliance with stringent requirements, and monitor developments as the regulatory framework develops

Introduction

On 29 August 2025, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) closed their consultation on legislative proposals to establish licensing regimes for VA dealing and VA custody services.

Hong Kong’s current regulatory framework for virtual assets (VA) primarily covers VA trading platforms, stablecoin issuers, and traditional finance players who deal in or manage VAs. The consultation aims to strengthen this framework and fill gaps in the current regimes. The consultation papers propose two distinct licensing regimes to regulate VA dealing and custody services to enhance investor protection, mitigate risks, and foster a sustainable VA ecosystem. The SFC is expected to act as the standard-setter, establishing regulatory requirements for licensed entities, while the Hong Kong Monetary Authority (HKMA) will act as the frontline regulator for banks and stored value facility (SVF) licensees providing these services.